Malcolm McLean: Pension reforms on pause while Brexit fog clears

Malcolm McLean

“Brexit means Brexit, and we are going to make a success of it.” So said Theresa May, standing outside the House of Commons shortly after learning she had become the new leader of the Conservative party and therefore our new Prime Minister.

Just how easy she is going to find it to deliver on that bold promise remains to be seen.There are still great divisions in the country and in parliament about the wisdom of our leaving the EU and the economic consequences that may flow from it.

Many economists and other significant figures in the business community are of the opinion that the result of the referendum was bad news and warn there will be a price to pay by each and every one of us in the years to come.

Of course, there is the opposite view that leaving the constraints and restrictions of Europe will free us up, allow trade deals to flourish with the rest of the world, permit us to regain control of our borders and ultimately make the nation more prosperous as a result.

I suspect I am not alone in feeling very confused and uncertain about all this – what it means for the future of our country and for all of us individually.

Despite all the predictions, the truth is surely no one knows at this early stage exactly how events will unfold and what further turnarounds and surprises may be round the corner.

Indeed, given what has happened already in the short time since the result of the referendum became known, the only surprise for me would be if there were to be no further surprises as the process of disengagement from Europe moves forward.

The economy will inevitably take centre stage from now on and I would expect other “domestic” matters like pensions would to be pushed into the background. For the next two years, at least until we finally withdraw from Europe, it is difficult to imagine pension reform will feature heavily on any government agenda.

Many in the pensions industry believe ex-chancellor George Osborne’s plans to radically reform pensions are now a pipedream and projects like the lifetime Isa and second-hand annuities market could be kicked into the long grass.

They may well be right, though I am not sure that would bother most of us unduly, given the amount of change the industry has had to absorb in recent years. In this regard a period of restraint and consolidation would clearly not come amiss.

But what would not be welcome and has to be a worry is the prospect of a serious downturn in the economy which results in the Government feeling it has to make major cutbacks in things like pension tax relief – or even contemplates abolishing it altogether.

Another potential target for a big cost saving could be the abandonment of the triple-lock on the state pension, although political expediency may mean this will not happen before 2020 when its affordability and continued existence were due to be reviewed anyway.

Assuming nothing more dramatic occurs in the meantime, the next significant event in the financial calendar is likely to be the Autumn Statement which by all accounts will be, on the back of Brexit, more like a full blown Budget this time round.

What happens from that point on is anybody’s guess. We could be facing a recession or alternatively feeling a bit more confident about the economy going forward. Trying to predict the full effects and consequences of Brexit is a difficult, if not impossible, task and that unfortunately is likely to remain the case for some time to come.

One thing is for sure: we shall look back at this period of our history in due course and remember it as a time of great turbulence and change. Whether that proves to be good or bad remains to be seen.

Malcolm McLean is senior consultant at Barnett Waddingham