With the general election over and the Conservative party having won a firm majority in the House Of Commons, Prime Minister Boris Johnson is set to reintroduce the Withdrawal Agreement Bill to "get Brexit done". Given the changes in the House of Commons, it now seems likely that, this time, the Bill will be passed.

The Bill implements the UK-EU withdrawal agreement into UK law and makes associated provision in connection with the agreement. For example, it will amend the European Union (Withdrawal) Act 2018 to ensure that EU law continues to apply in the UK during the transitional period following the UK's withdrawal from the EU (which is expected to happen on 31 January 2020). The transitional period, referred to in the last version of the Bill as the 'implementation period', is intended to expire on 31 December 2020.

The European Union (Withdrawal) Act 2018 put in place the legal framework that would come into force in the event of a "no-deal" Brexit. The Act did not amend pensions legislation but regulations were made under it to ensure that pensions legislation would continue to operate as intended in the event of a no-deal Brexit (for example by amending away reference to EU institutions which would no longer be relevant post-Brexit).

The Withdrawal Agreement Bill (presuming it remains the same or similar to the last version considered by the House of Commons) will allow the mass deferral of the effects of no-deal regulations so that UK law does not diverge from EU law during the implementation period. Instead, the regulations will come into force when the implementation period ends.

Regardless of whether the UK experiences a no-deal Brexit or an implementation period which comes to an orderly end, there is unlikely to be significant legislation affecting pension plans as a consequence. However, pension plan trustees and sponsoring employers still need to be aware of the material implications of Brexit and to plan for them. We have prepared a checklist summarising some of the main implications, including brief commentary on the issues and where more information can be found.

Some areas where Brexit may impact on pension arrangements Comment Where can I get more information?
Financial:
  • Employer covenant
  • Funding & investment

Trustees and employers have been dealing with market volatility since the Brexit referendum.

A PLSA survey published on 3 October 2019 suggested that those operating pension plans had stepped up Brexit preparations significantly in the previous 12 months.

The survey indicates the top six actions taken to mitigate Brexit risks were: reviewing asset allocation, reviewing the employer covenant, reviewing currency hedging strategy, reviewing hedging strategy of non-currency risks, commissioning extra advice from professional advisers and altered asset allocation.

Advice from the Pensions Regulator

PLSA's Brexit to-do list for trustees
 
Data protection

The Government has previously said that transfers of data from the UK to the European Economic Area (EEA) will not be restricted post Brexit. 

However, in the event of a no-deal Brexit, GDPR transfer rules will apply to any data coming from the EEA into the UK. Trustees and sponsoring employers receiving personal data from other EU countries need to put in place alternative arrangements to ensure the continued flow of that data. 

Trustees and sponsoring employers receiving personal data from the US will need to make sure that arrangements to ensure the continued flow of that data are established when the UK is no longer a party to the EU/US Privacy Shield. 

During any implementation period the GDPR will continue to apply in the UK and the action to be taken by trustees and sponsoring employers will not be as urgent (but will still need addressing in readiness for the end of that period). 

Advice from the Information Commissioner's Office
 
Contracts relating to pension plans Contracts held by trustees or sponsoring employers need to be reviewed to check if there are any unintended or unwanted Brexit consequences, particularly where any party involved has links to the EU (for example, through its company structure or the subcontracting of work).  
Member communications  Effectively communicating with members regarding Brexit concerns is to be encouraged (especially where there may be worries regarding the payment of benefits if members live in another EU country).  
Plan rules Trustees may wish to review their pension plan rules and other governing documents to identify whether they contain any provisions which do not reflect UK pensions legislation as it will stand after Brexit (together with unnecessary references to EU bodies and organisations).   
Cross-border schemes In the event of a no-deal Brexit, the legislation governing cross-border pension plans in the UK will no longer apply. UK-based pension plans will need to check whether EEA employers are still able to contribute to their arrangement; UK employers using a pension plan based in the EEA will need to check that it complies with UK requirements. Advice from the Pensions Regulator

For more commentary please see our update. Although drafted in March 2019 when a "no deal" Brexit appeared more imminent, its comments are still relevant either in the event of a no-deal Brexit or at the end of any implementation period.

We will provide a further update when there is certainty on the basis on which the UK will leave the EU. In the meantime, if you would like to discuss these or any other issues regarding the impact of Brexit on your pension plan, please speak to your contact in the Pensions team.