Following the UK's vote to leave the European Union, we consider the potential implications for employers and trustees of occupational pension schemes.

Key issues

  • Defined benefit (DB) schemes - employer covenant, investment strategy and funding.
  • Defined contribution (DC) schemes - investment options.
  • Existing legislation remains intact but could be subject to future change.
  • There is uncertainty in relation to the impact on upcoming requirements.

Potential impact

For DB schemes, trustees should consider the impact on employer covenant, investment strategy and funding. In a guidance statement for trustees issued in July, the Pensions Regulator stated that any impact for DB schemes will be scheme and employer specific and that it is important that trustees and sponsoring employers discuss the issues in an open and collaborative way, review their position and ensure they understand the risks in the scheme's investment strategy and employer covenant. Depending on their conclusions, trustees may decide that they need to seek increased contingent security for the scheme and employers will need to consider how to respond to any such requests.

For DC schemes, members' fund values may be negatively impacted by market volatility and employers and trustees may receive requests from members approaching retirement age to work longer and defer drawing their benefits. The Pensions Regulator's July guidance included that, as the future implications of any withdrawal from the EU become clearer, trustees may consider it appropriate to make changes to the investments included in the default arrangement and/or other investments offered to members.

A significant amount of UK pensions legislation originates from the EU, for example, scheme specific funding requirements for DB schemes and non-discrimination. However, because these provisions have been implemented into national law they remain intact for the time being, although it is possible that they could change in the future. However, it is worth bearing in mind that: (i) large-scale repeal or reform that goes against equal treatment or reduces the regulation or security of pension schemes may be unlikely; and (ii) even if the legislation is changed, where legislative requirements have been incorporated into scheme rules, scheme amendment powers and legislation preventing detrimental changes to accrued rights may prevent changes to those rules.

There are a number of upcoming issues which are now uncertain, such as the extent to which a new European Directive containing provisions in relation to pension scheme governance and disclosure will need to be implemented in the UK and the impact the referendum result will have on the Government's approach to the question of equalisation of Guaranteed Minimum Pensions and HMRC's policy on employers reclaiming VAT on administration and investment management costs.

Further considerations

Changes may be seen in the way that the UK courts, Pensions Ombudsman and Pensions Regulator interpret UK legislation, for example in relation to issues such as equal treatment and TUPE, if they are no longer bound to consider the interpretation of the European courts. However, any change in this area is likely to be gradual.


  • Trustees and employers of occupational DB schemes should engage collaboratively in considering the impact on funding.
  • Trustees of DC schemes should consider consulting their investment advisers about the impact on the investment funds offered by the scheme.
  • Trustees should be ready to deal with queries from members about the impact of the referendum result on the scheme.
  • Trustees and employers should be aware of the potential future impact on legislation and keep the position under review..