Employee Benefits


As you will be aware, the result of the EU referendum was announced early on Friday, 24 June 2016 with a vote in favour of the UK leaving the EU. The result of the vote has led to increased political uncertainty.

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You may have heard many references to Article 50. This refers to Article 50 of the Treaty on the European Union, which sets out the mechanism for leaving the EU. The UK will stop being an EU Member State two years from the date of notice. In fact, this period can be shorter if the withdrawal agreement is finalised, or can be extended further.

David Cameron confirmed on Friday that he will not trigger Article 50 before he steps down as Prime Minister in order to enable his successor to conduct the negotiations.


In the wake of the referendum vote, you and your employees may have concerns as to what happens now. It has widely been felt within the UK pensions arena that UK pensions do not work well with EU policies, so this does provide the opportunity for UK pensions legislation to move away from some EU requirements, especially in areas such as equal treatment. However, it is important to stress that the UK will remain an EU Member as our exit is negotiated and therefore existing laws and regulations remain in place during that period. The Financial Conduct Authority issued a statement on Friday confirming …

Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for Government and Parliament.

Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.

Consumers’ rights and protections, including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the Government changes the applicable legislation.”

Clients with overseas employees and subsidiary companies may be concerned over the long-term impact for these employees and employers, and we will keep you informed of developments. This may have a direct impact on benefits, or it may not.


However, of more immediate concern to many scheme members will be investment turbulence and falls in stock markets and other asset classes. George Osbourne yesterday (Monday 27) moved to reassure the country …

Markets may not have been expecting the referendum result – but the Treasury, the Bank of England, and the Financial Conduct Authority have spent the last few months putting in place robust contingency plans for the immediate financial aftermath in the event of this result.

We and the PRA (Prudential Regulatory Authority) have worked systematically with each major financial institution in recent weeks to make sure they were ready to deal with the consequences of a vote to leave.

Swap lines were arranged in advance so the Bank of England is now able to lend in foreign currency if needed. As part of those plans, the Bank and we agreed that there would be an immediate statement on Friday morning from the Governor, Mark Carney.

… the Bank of England stands ready to provide £250 billion of funds, through its normal facilities, to continue to support banks and the smooth functioning of markets.

… In the last 72 hours I have been in contact with fellow European finance ministers, central bank governors, the managing director of the IMF, the US Treasury Secretary and the Speaker of Congress, and the CEOs of some of our major financial institutions so that collectively we keep a close eye on developments.

… We were prepared for the unexpected. We are equipped for whatever happens. And we are determined that unlike eight years ago, Britain’s financial system will help our country deal with any shocks and dampen them – not contribute to those shocks or make them worse.


Our Investment Management team who cover investment strategies for our individual clients provided feedback for us on Friday morning …

Increased coverage of the EU Referendum, the results of (as it turns out, mainly inaccurate) polls and other global news weighed heavily on equities in the UK until this week, when right up to the close of markets yesterday (Thursday) there was a strong rally in the asset class, and in Sterling. Not even 24 hours later, we are seeing what we feared in the event of a vote to leave the EU – chaos in currency markets and significant falls in equity markets, led by the UK and Europe, but including Asia and the US. We still have to consider whether the Federal Reserve will raise US rates, the impact (if any) of Trump vs Clinton in November’s Presidential elections, low interest rates, low inflation and a world seemingly fixated by the level of China’s GDP.

… relatively sanguine equity markets can turn quickly and so it appears first thing today, with investors reacting, of course, to the seismic (and clearly unexpected) vote (by nearly 52% of UK voters) to leave the EU. We believe in the fundamentals of assets when making investment or allocation decisions, but sometimes sentiment has the momentum. As of today, both seem aligned in driving stocks down. Markets tend to discount bad news early and think about it later; however, this looks like the start of a period of significant uncertainty, and investors dislike that almost more than bad news. We have to consider how to react to markets that may or may not be over-reacting, and there is some history to consider (as, of course, Churchill would always insist we do), despite this being an unprecedented decision (unless one counts the Tudor Brexit of 1534).

A recent study by Schroders and Financial Express shows that whilst ten days after the biggest one day falls in the FTSE All-Share index (driven, of course, by the behemoths of the FTSE 100), markets were usually even further off, one year later there had invariably been a significant recovery to an average c.16% positive return. We always felt that the “upside risk” of a vote to remain, given other economic and market concerns globally, was limited. The “downside risk” looked higher, but was equally unquantifiable, and so it is this morning.

Considerations for our investment team include the future for the EU, the potential for action from the Bank of England to “protect” Sterling, the equal possibility that inflation may rise as a result of increased base costs, other central bank action, lower GDP as the continuing (increased) uncertainty reduces business investment and consumer spending, the possibility of a political vacuum in the UK and Europe, and indeed the aforementioned issues in the US, China and beyond.


Some of your scheme members may be concerned over the investment, political and legislative implications; however, Mattioli Woods and your pension provider are and will be taking measures to help continue supporting the scheme and its membership throughout this period. We would urge members to act only after advice has been taken.

If you or any of your members have any immediate concerns regarding your scheme investment strategy, or any individual choices that have been made or any other issues arising as a result of the EU referendum, please contact your Employee Benefits consultant. In the meantime, we will keep you informed of any changes that will affect you.

Alan Fergusson
Employee Benefits Director

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