Potential Effects of the Brexit for US Residents with UK Pensions

 Image: benjamin-alderson.com

Image: benjamin-alderson.com


Benjamin Alderson guides deVere USA, Inc., as president and CEO and provides a global clientele with strategic direction in investment pathways. A regular blogger, Benjamin Alderson writes on current events and economic trends at www.benjamin-alderson.com. He recently examined potential consequences of the United Kingdom’s Brexit vote on a number of factors, including pensions.

US residents with British pensions face a high level of risk, with UK government bond (Gilt) yields declining significantly following the referendum and transfer values increasing as a result. This works in short term favor of those seeking to withdraw money from defined benefit plans. However, large payouts place these schemes under stress, which could lead to cash flow issues and transfers being halted until underlying issues are resolved.

The decline in Gilt yields is also tied to increasing levels of pension deficit, with the overall UK pension deficit expected to approach $1 trillion pounds. As Mr. Alderson describes it, when this threshold is breached, the continued survival of company pension schemes could come under threat.