17 December 2019
In my 3 December blog I set out the key things I’d suggest that pension scheme sponsors do to prepare for 2020. How is that affected by the election result? In a nutshell, not at all. So I won’t repeat that here; instead I’ll summarise my immediate thoughts on what the Conservative majority might mean for pension sponsors.
Does “getting Brexit done” mean uncertainty is over?
At this stage I think I could be persuaded to bet my house on the UK leaving the EU by 31 January 2020 (albeit I wouldn’t get good odds for that). In the short term at least, the resolution of this aspect of Brexit uncertainty may lead to calmer markets (good for pensions) and increases in the pound (good or bad for different sponsors). On the first day post-election, share prices have risen, for example utilities (which are no longer at risk of nationalisation), banks, property, and UK focussed retailers with few non-sterling import costs – all good news for investments and potentially covenant strength.
But if Boris doesn’t get the trade details sorted by his 31 December 2020 deadline, will we default to no-deal (with a potentially adverse impact on the economy and on pensions in the short to medium term)? On the other hand, does Boris’ big majority give him the flexibility to deliver a softer Brexit? Many will argue that would be good for sponsor covenants in general, as well as the markets and investments.
What about the Pensions Bill?
The most important point is that the October Pensions Bill will probably be reinstated – the Conservative manifesto said as much. However, given the government’s likely focus on trade negotiations with the US, Australia, New Zealand and Japan in addition to the EU, the timing for it reaching the statute book remains a little uncertain. The Pensions Bill includes very significant new Pensions Regulator powers which will affect many corporate processes and decisions. My colleague Jonathan Camfield has illustrated just what that could mean in practice for sponsors in his recent blog. The Pensions Bill will also lead to big changes to the funding regime, legislation to enable new collective DC plans and the pensions dashboard.