Brexit and Pensions: Act Now to Stop the Political Uncertainty from Damaging your Pension
I’ve heard some people saying they’re going to wait and see what happens to Brexit and pensions decisions are being delayed accordingly. I can understand why the political unrest causes this sentiment. But economics and politics don’t always mesh well. I urge you not to compromise tomorrow’s wealth over today’s political failings. Let me show you why it’s not necessarily a bad time to invest.
Brexit and Pensions: The Impact on Global Markets
They say that when America sneezes, the rest of the world catches a cold. The US economy is the largest and it can and often does impact the rest of us. But how important is the UK in the world economy?
Well, UK equities (shares) make up around 5%
of the total value of global equity markets (Visual
Capitalist illustrate it well). UK government debt, at c.$2 trillion, is the
sixth largest in the world. While it’s clearly important, it’s still dwarfed by
US, Japanese and EU debt. So, the impact of Brexit on global markets is likely
to be quite small. Whichever way it ends up, I expect the economic impact of
Brexit to be focused on the UK and to a lesser extent, on the EU 27.
Since the referendum, the value of sterling and UK shares have lagged behind other leading markets. This is owing to the uncertainty the vote created. However, since more than half of the revenues of FTSE 100 and FTSE 250 companies are generated overseas, the impact of domestic issues on these companies is likely to be limited. Possibly enhanced by the weak pound.
Diversified Portfolios Overcome Localised Risk
So, many British companies offset their risks in their home markets by establishing overseas income streams. The same applies when you entrust your pension savings to us. Our expert fund managers invest globally. They look at long term trends as well as short term performance by sector, too. All of which means that the Brexit risks to your pensions can be minimised by investing in diversified portfolios of assets.
In It for the Long Haul
Above all, although right now it seems like the Brexit haggling is going on forever, it won’t. Until then, keep calm and carry on! Try to ignore the bluster and resist the urge to react to every sensational headline. As history has shown us many times, markets will go down and up, but over the longer-term, economies and businesses adapt to change.
Don’t forget that investing is a long-term activity. I always encourage my clients to take a long-term view of investing. Whatever happens, however it pans out, you can rest assured that our panel of experts will invest on your behalf in a diversified portfolio. That’ll ensure the impact of Brexit on your pension will be as good as we can make it. Let us minimise the impact of any downturns on your investment plans and take advantage of opportunities as they arise. Consequently, delaying while the politicians decide what to do is not a policy I’d advocate.