A robust economy, proper regulation and a strong financial services sector are needed by U.K. retirement plans to be the result of negotiations for the U.K. leaving the European Union, says the Pensions and Lifetime Savings Association.
In a briefing note Tuesday, the association said a successful outcome of the negotiations from a retirement plan perspective will depend in part on an economic environment where sponsoring employers are strong and disruption to the economy is minimal.
Regarding regulation, U.K.-only plans must be exempted from rules affecting cross-border plans in Europe, and from any future EU regulation regarding the introduction of a solvency-based regime, said the note.
Pension funds in Europe are directly subject to EU legislation under the Institutions for Occupational Retirement Provision directive, due to be implemented in the U.K. by January 2019. The U.K. has worked to ward off a threat of an EU solvency-style regime for corporate plans, but the topic remains on the agenda for the EU pensions regulatory body, European Insurance and Occupational Pensions Authority. “While we believe high levels of access to the single market are very important, it is also essential that any future moves by the EU to propose a new EU solvency regime should not apply to defined benefit schemes in the U.K., unless they also operate outside the U.K.,” said the note.
The third requirement, for a strong financial services sector, is necessary since retirement plans benefit from access to the U.K.'s “successful financial services sector,” said the note. “From the pension scheme perspective, a successful outcome from the Brexit negotiations would include … continuation of the passporting regime (for U.K. institutions and money managers) so that pension funds can invest efficiently.”
The publication of the note coincided with a speech by Prime Minister Theresa May, setting out the government's plans for Brexit. The plan includes the intention of implementing a phased process to the new arrangements, which Ms. May intends on triggering by March 31. Ms. May wants to reach an agreement about the U.K. and EU's future partnership by the time the two-year Brexit negotiations period under the Article 50 process has concluded. “From that point onward, we believe a phased process of implementation, in which both Britain and the EU institutions and member states prepare for the new arrangements that will exist between us will be in our mutual self-interest. This will give businesses enough time to plan and prepare for those new arrangements,” said Ms. May on Tuesday.
The purpose, added Ms. May, is to “seek to avoid a disruptive cliff-edge, and we will do everything we can to phase in the new arrangements we require as Britain and the EU move toward our new partnership.”
Ms. May's stance on achieving an orderly exit was also welcomed by the Investment Association, which represents U.K. money management firms with £5.7 trillion ($7 trillion) in assets under management.
Ms. May also highlighted the importance of providing certainty for EU workers in the U.K., “who make up 11% of workers in the asset management sector,” said Chris Cummings, CEO of the Investment Association, in a statement. “The asset management industry relies on the U.K. remaining open and attractive to global talent.”