With Britain’s historic vote to exit from the European Union on 23 June 2016, the lasting effects on British occupational and personal pensions remains uncertain.
Brexit has resulted in a sharp decline in UK gilt yields. As a result, data from Hymans Robertson shows an increase in UK defined benefit/final salary pension liabilities to £2.2 trillion. The total deficit rose from £820 billion overnight, nearing a record £909 billion. For those in defined benefit schemes, it is important to understand and monitor such schemes and determine whether such schemes are likely to be able to pay-out pensions to members in the future.
For defined contribution and personal pension schemes, if people are at or near retirement they should consider carefully whether they really need to start to draw from their UK pension in such volatile times. In particular, where a pension scheme only offers the option of an Annuity at retirement, careful consideration should be given to whether a transfer to a new type of pension offering flexi-access drawdown should be made.
Flexi-access drawdown enables you to retain the capital value of your pension while drawing a pension income at times and in amounts as desired. There is a downward pressure on interest rates at the moment (as further indicated by Mark Carney today), so Annuity rates may get even worse and unlikely to improve any time soon.
Consequently, there has never been a more urgent time to evaluate your UK occupational or personal pension schemes. A lot has changed since the introduction in April 2015 of the new UK pension freedoms and now is an opportune time to get up to date.
If you want to take advantage of the opportunities now available for your UK pension and reach your retirement objectives in these changing times, contact Florin Pensions today.