What Does Brexit Mean For Markets and Pensioners?
Posted on: 15 September 2016 by Samantha Harris
Though the initial shock is subsiding, expats may expect more changes down the line.
With Britain’s surprise referendum outcome this past June, many British pensioners around the globe are wondering just how this Brexit, or British Exit, will affect their livelihoods. Unfortunately, predicting exactly how the Brexit will play out is difficult to determine. The process will be a protracted one and will look slightly different depending on what country you live in. The best approach to mitigating any associated risks is to understand what those risks are, how they apply to you, and how to take a conservative approach to your finances (at least until the climate has stabilized).
Markets have become more volatile
The repercussions all around have a low degree of predictability, from trade to immigration to market activity. Markets around the world have experienced a bit of upheaval, though the largest effect is within the UK. Upon the realization that the vote would swing to the ‘leave’ voters, the GBP took a deep nosedive of above 15% (source). However more recent reports have acknowledged that the GBP appears to be on the rebound.
A less favorable currency conversion
British expats around the world will feel the weakening of the GBP in their investments, as you may have guessed from the previous point. For those who chose to purchase other currencies like the USD prior to the vote, however, the impact may be a little softer.
There are potential benefits for newer pensions
Pensioners who have just begun contributing to their account may find a notable benefit as the markets rebound from the initial shock and periodic aftershocks of the referendum decision. Established pensions will have taken a hit, but are expected to recover should pensioners keep their savings invested.
Assets held in other EU countries may face new restrictions
While there is a current agreement in place that protects British pensioners who have cash and assets in other EU countries, this agreement may change upon the EU-UK renegotiations (source). Those who own property may find that EU requires higher taxes upon Britain’s secession from the EU, but it’s unlikely such changes will go into effect until much later.
Pension disbursements are likely to remain frozen
Despite negotiations that took place last year, it looks like pensioners in many countries (including Australia) will continue to receive payouts at the same low rate as before. Some expats even expect Britain to cease pension uprating for EU countries (source). However once the dust is settled, we may see negotiations return with possible compromises for approximately 1 million British expats living around the world, and potentially different compromises for future expats as well.
There may be more referendums to come
Despite Scotland’s failed 2014 referendum, a bid to secede from the UK may once again be on the table in the years to come. The majority of Scotland’s population voted to remain in the EU, so the next referendum may play out differently. However another referendum is not set in stone, according to the Express. Should it come to fruition, though, Britons will want to keep a close eye on market activity once again.
With the uncertain nature of this increasingly unpopular referendum decision, the most important thing you can do is to remain calm and rational. Avoid panic selling (doing so will only make your losses concrete ones) and taking financial advice from unqualified parties. Instead, seek sound financial advice from reputable sources, like the team at Market Matters. They offer comprehensive investment advice at competitive rates, and cater to those living in Australia.