What Brexit Could Mean For Your Retirement

According to research from Politico, 61% of Brits aged 65 and over voted to leave the European Union last June; by comparison, 75% of under 25s voted to remain. The media made much of this generational divide, with Time magazine quoting one elderly Leave voter as saying that “identity and culture are often defined not with reference to Europe” within his age group.

Regardless of the motivation behind their votes in favour of Brexit, pensioners and retirees could actually be hit extremely hard by the result of the referendum. Given that the particulars of Brexit remain closely shrouded in mystery, we’ve put together worst and best case scenarios for anyone entering retirement once Article 50 has been triggered, as well as some catch-all tips for making the most of your pension in an independent Britain.

Ways to make your retirement easier, whatever the outcome of Brexit

With the value of the pound in constant flux, a cash bonds alternative to traditional pensions may be worth considering; Forbes have recommended “holding individual bonds to maturity” in order to keep a running source of income throughout retirement. A number of companies also offer wine bonds for retirees instead of cash bonds, at higher rates. However, it’s essential to use wine brokers when considering fine wine investment;  “no investment is foolproof, least of all wine investment” say The London Wine Cellar in their guide to fine wine investment.

Some experts have also suggested transferring pensions overseas, with FT Adviser reporting a 21% increase in inquiries on the matter following the Brexit vote. Ultimately, whether or not British pensions—along with any other savings—will take a dramatic hit following the UK’s departure from the EU remains to be seen. What is important is that retirees and savers continue to put some of their income aside so that their golden years can be as comfortable as possible, regardless of the confusion.

The worst case scenario

The budget cuts caused by the UK’s departure from the EU could mean that the horizon of retirement just got a little further away. It was reported last November that the state pension age for millennials could rise to 70—the current age is 68—with future economic changes potentially altering that further. Data from one pension consultancy firm states that this has left 75% of Britons with a retirement income below the level currently recommended by the government.

For those currently in or approaching retirement, the news is similarly doom-laden. A recent Aviva survey showed that roughly a quarter of 55+ year olds felt their financial security was “threatened” in the wake of the continuing post-Brexit economic turmoil.

Concern around pension deficits is also mounting. In the two months following the Brexit vote, the deficit hit a record high of £390 billion after rising by £80 billion, just in that time period. This could have a crippling effect on pension schemes for hundreds of British companies, which have already been struggling for the last few years under the former chancellor.

The best case scenario

According to the Financial Times, there may actually be little to worry about if you have already qualified for a state pension for a decade. Those retiring abroad may be harder hit than domestic pensioners, and one survey saw 84% of over-55s saying the Brexit result has left them less likely to move elsewhere to enjoy the autumn of their years.

The current government has also guaranteed that, for the next three years, the “triple lock” on state pensions—which ensure they rise at the same annual rate as whichever is highest of the consumer price index, 2.5% or the average wage—will remain in place, regardless of calls for it to be scrapped. Similarly, it has also been suggested that those approaching retirement age in the next few years may have their pensions less impacted by Brexit, as the markets are likely to have stabilised by that point.