As the referendum is now only one day away and arguments for both ‘Remain’ and ‘Leave’ are being considered, one of the major questions, which may come to affect voting decisions greatly, is that of the effect a Brexit vote could have on UK pensions. It was noted, after the Scottish independence referendum, that pension security was the major concern which won the vote for the ‘No-to-independence’ side. If the consideration of pension safety should play a similar role in Thursday’s referendum, staying in the EU clearly becomes the more likely choice for a number of reasons discussed below.

The ‘Leave’ campaigns argument for more self-determination on UK pension policy does not add up

The ‘Leave’ campaign has tried to make UK pension policy an argument in their favour, stating that current and future EU legislation on pensions will infringe and harm UK interests. The European Union currently has some legislation which affects UK pension policy, mainly to the purpose of harmonisation of certain aspects to allow for the possibility for free movement of people across the European economic area. There are currently negotiations over new additions to harmonised legislation on the way which could bring changes to the UK pensions system that may not be welcomes by everyone. However, blaming the European Union and UK inability to affect EU law making sufficiently for the implementation of somewhat unfavourable changes may have to be considered as scapegoating. Blaming international organisations for unpopular but necessary policy measures has always been a common choice for political parties and governments to avoid having to take responsibility and face voters disinclination head on. In the case of EU policy decision on pensions it would be reasonable to think that this may be the case. Like many other European countries, the UK is currently facing the issue of an ageing population. The UK parliament estimates that between 2015 and 2020 the general population is going to grow around 3%, while the population over the age of 65 is expected to increase by 12% (1.1 million) and the number of people aged over 85 by 18% (300,000). Therefore, some new policy changes which can create better working opportunities for older workers, encourage more private pensions and raise pensioner age, as much as they are painful to some, may simply be necessary to support the demographic change. Leaving the European Union gives the UK more self-determination over its’ legislature, but it does not change the fact that the issue of an ageing population is putting strain on current UK pension policy and needs to be addressed through changes. The new-found freedom is also unlikely to be used to reverse the adoption of the Specific Funding Requirements, one of the main EU directives on pensions. The UK’s predecessor, the Minimum Funding Requirement, had been recognised for its inadequacy and many Trade Unions are likely to lobby for the preservation of the current directive.

The UK’s ability to make changes to UK pensions legislation depends on a post Brexit negotiated deal

Further, any ability for more self-determination on this policy area also depends on the negotiations on the terms of the UK’s exit from the European Union. Should the UK decide to join the European Economic Area, like countries such as Switzerland and Norway, it will still have to harmonize pension legislation with the European Union, without having a say in their design any more.

Why Brexit may decrease your UK pension value

Lastly, there is great concern over what market movements could mean for UK pensions. Most UK workers save into a defined contribution pension. These pensions do not have a fixed term on retirement income but depend on the market. Financial instability or, in the worst case, a market crash will lead to these pensions being worth considerably less. While this may not affect young people greatly, as they have time to wait for markets to recover in the future, people who are looking to retire soon should be worried about how much their hard work will pay out in the end. Even workers who are looking forward to a fixed term pension may have reason to worry. A Brexit vote may lead to the Pound losing in worth and inflation to go up, meaning that their money will ultimately buy less. This especially is, reason for concern for the many pensioners who have set out to enjoy their retirement abroad. As their pension is fixed in terms of Pounds their real living income will decrease as the Pound loses out against local currencies. Further they face the threat of losing access to local health services which are currently freely usable to them under EU legislation.

It has been highly debated what a possible Brexit vote on Thursday could mean for the UK housing market. Especially the London housing market, which is largely fuelled by the demand of overseas buyers, are under threat of trembling greatly if the UK chooses to leave the European Union. In the past months it has been recorded that asking prices in London’s most exclusive areas have been slashed by considerable amounts. Property portal Propcision stated in May that “a prime Central London property in Belgrave listed for £42.5 million has had 14pct reduced from its asking price since coming on the market. This represents a whopping £6 million being wiped-out from its original valuation.” The report further stated that Westminster, Kensington and Chelsea being the areas most affected with properties loosing as much as 22% on their initial asking price. A Brexit vote on Thursday may see an extension of this trend to more areas and lower valued properties as uncertainty in the markets, fear of an economic downturn and loss of interest of international buyers may drive down demand. Especially with Chinese investors, who have shown great interest in the London housing market in recent years and helped to support the constant price rise, may in the future refocus their attention away from the London housing market. Chinese property portal Juwai.com stated this week that a Brexit would be unlikely to lead to changes in Chinese demand for London properties. CEO Charles Pittar told CNBC on Tuesday that Chinese interest in the London housing market was based on lifestyle factors that were unlikely to change after a Brexit vote. According to him a large amount of Chinese property demand is fuelled by parents looking to buy properties for their children as they go to study in London. High quality education is therefore a main factor driving overseas property demand in the UK’s capital. However, Pittar’s focus on education as prime reason for property demand may turn out to be an issue in the long term due to the effect a Brexit vote could have on the UK’s higher education system. As Stephen Hawking stated recently, one of the biggest Brexit concerns is the loss of EU university funding which could mean a downturn in the quality and quantity of research undertaken at UK universities and see the UK higher education system losing its’ status as one of the best in the world. At the same time China and other Asian countries have over the past years greatly improved the quality of their higher education and multiple Chinese universities are now counted under the best in the world. These ongoing developments could see interest of Chinese students to enrol in UK universities decrease and therefore lower the necessity of Chinese to buy property in London. Further concern comes from the overall slowdown of the Chinese economy which raises cause for concern of the general dip in interest of Chinese to invest in overseas property. As to demand from other overseas destinations, it can be argued that a great amount of demand from overseas buyers is driven by London’s role as financial hot spot. London and Frankfurt as far represent Europe’s main financial capitals with London so far being considered the number one financial capital in the world. However, the uncertainty in the markets and unfavourable changes to the Pound post Brexit could lead to a push towards Frankfurt in the long term, making it the more attractive location for investors in Europe.