Brexit 'will wipe thousands of pounds from retirement funds'


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Pensioners will see thousands of pounds wiped off the value of their retirement funds if the UK votes to leave the European Union, according to Treasury analysis.

The value of the total assets held by all those aged 65 would drop by up to £300 billion as a result of the economic shocks of Brexit, the analysis concludes.

With the Remain camp predicting Brexit would hit house prices, hike inflation and cause uncertainty on the stock market, Chancellor George Osborne said it was important that pensioners "understand what's at stake for them".

But his former cabinet colleague Iain Duncan Smith dismissed the report as an "utterly outrageous" attempt to divert attention from figures showing net migration from the EU had reached 184,000.

Older voters are more likely to turn out at elections and polling has indicated they are more likely to back Brexit, making them a key target for both camps ahead of the June 23 referendum.

Severe shock scenario

In the last salvo before the official purdah period blocks the Government machine from releasing information about the referendum debate, the Treasury warns that existing pensioners and those coming up to retirement age would be hit.

The report shows that the total assets held by those aged over 65 would drop by £170 billion in the event of a more moderate shock, and by £300 billion in a more severe shock.

The analysis suggests that for a person aged over 65, with the median portfolio of housing and non-pension assets, the loss in wealth is estimated to be around £18,000, or up to £32,000 in the severe shock scenario.

An existing pensioner, with a defined contribution pot worth £60,000 invested in a typical fund would see between £1,900 and £5,200 wiped off its value by next year, the report suggested.

For people expecting to retire around 2030, today's 50-55 year-olds, the longer-term effects of lower wages, higher inflation and stock market uncertainty will hit their funds, the report said.

The analysis examined the position of someone aged 50, on average wages and with defined contribution pension assets of £20,000, who is contributing 8% of their earnings into their pension fund between now and 2030.

It found their pension assets could be between £3,800 and £5,800 lower in 2030, in today's prices, if the UK cuts ties with Brussels - making them between £223 and £335 a year worse off in retirement.

For people on the state pension, rising prices would mean an end to inflation-busting increases in their income.

Reduction in real incomes

The triple-lock means that the state pension rises every year by the highest of inflation, earnings growth or 2.5%.

But with inflation forecast to be around 2.5% a year after Brexit, the increase will only keep pace with prices rather than rise above them.

The Treasury suggests this would be equivalent to a reduction in real incomes of around £137 a year in the event of a more moderate shock to the economy or £142 in the severe scenario, which would apply if post-Brexit UK failed to negotiate a new trading relationship quickly.

In an illustration of the link between the wider economy and pension assets, the Treasury highlighted the 10% fall in their value in the 1990 recession and the 15% drop in 2008 at the time of the financial crash.

Mr Osborne said: "Much of the debate so far has focused on the potential economic fallout of a vote for Leave for those now in work, in terms of the impact on their jobs.

"But it's important that pensioners understand what's at stake for them too on June 23.

"Pensioners who have worked hard all their lives deserve dignity, security and certainty in retirement. That's what we all hope for and what any responsible government should seek to provide.

"As Chancellor, I feel very strongly that my first responsibility is for people's jobs, livelihoods and living standards.

"I couldn't recommend something that we know would put all that at risk."

Cynical attempt to distract

Pensions minister Baroness Altmann said: "If we leave the EU, it is simply not credible to suggest that pensioners or pensions will benefit."

Former work and pension secretary Mr Duncan Smith said: "This is an utterly outrageous attempt by the Government to do down people's pensions and is little more than a cynical attempt to distract from the Government's broken promises on immigration.

"The biggest threat to British pensions is the European Commission's proposals to undermine occupational pensions which the Government themselves have described as 'damaging and reckless'. Meanwhile tax proposals from eurozone countries will wipe billions off British assets hitting pension funds hardest.

"These are measures that Britain is powerless to stop in the EU. Remember we have been outvoted again and again and lost each battle. After 30 years there is still no proper open market in services and the UK has lost out and continues to lose out.

"The real risk in this referendum is to stay in the EU, handing more money and power to Brussels."

Mark Wilson, chief executive officer at financial giant Aviva, said: "It's not rocket science. Brexit means uncertainty. That spooks markets.

"A fall in equities and in sterling is undeniable - the only question is by how much and for how long. That's going to hit people's pensions."

Brexit Breakdown - economics v migration