YOUR UK PENSION

Irish residents with British pensions could be looking at "a 10pc to 20pc drop in their [UK] pension" as a result of the recent falls in sterling, according to Jerry Moriarty, CEO of the Irish Association of Pension Funds.

Sterling has dived since the referendum - largely as a result of the uncertainty around Brexit - and so the British pensions held by many Irish residents are now worth less when converted into euro than they were before the vote. "So, if you are retiring soon, you may have been expecting €10,000 a year from your UK pension, and that pension may now only be worth about €8,000 a year," said Moriarty.

It is thought that around 120,000 Irish residents have a British state pension, and that tens of thousands of them also have a UK private pension.

Those who have already retired - or who are near retirement - are most vulnerable to the falls in sterling.

"How vulnerable your UK pension is to Brexit will really depend on how near you are to retirement," said Moriarty. "The value of your UK pension could all change by the time you retire, depending on how sterling fares."

Fresh falls in the value of sterling as Brexit nears - and after the UK leaves the EU (if it does) - could further erode the value of British pensions held by Irish people, leaving them with less to live on in retirement.

However, should sterling recover, or indeed get stronger after Brexit, the value of those British pensions should in time also recover.

So those who have some time to go yet before they retire and draw down their UK pension may not be too badly hit - depending on how sterling performs when they retire.

How to protect your UK pension

One way to limit any further hits which a weakening pound might have on a UK company pension is to transfer the pension over to Ireland. However, this is not something which should be rushed into and, indeed, it may be wiser to leave your pension where it is.

"If you transfer a UK private pension back now, you are locking that pension in at the current value - which has taken a knock due to the falls in sterling," said Moriarty.

There are a lot of other factors to bear in mind if tempted to transfer a pension from the UK to Ireland, particularly if it is a defined benefit (DB - where you are typically promised a pension based on a percentage of your final salary) scheme. "One of the advantages of a UK DB pension is that you have a guaranteed pension," said Moriarty.

"However, if you transfer that DB pension to Ireland, you're losing the guarantee and you're losing value too [if sterling is weak at the time of the transfer].

"The UK financial regulator has expressed concerns about the level of transfers out of British DB schemes and whether people really understand what they're giving up when they give up a DB pension in return for a capital sum."

The costs and tax implications of such pension transfers also need to be borne in mind.

Get independent financial advice if you have a British company pension which you will rely on heavily in retirement. "Look at your UK pension in the context of your overall retirement plan," said Moriarty.

"If your UK pension is just a small part of your overall pension pot, you might be able to live with it [the hit to your pension].

"But if you worked most of your life in the UK and most of your retirement pot is linked to a UK pension, talk to an independent adviser."

Your adviser may be able to suggest ways to protect your pension against any further falls in sterling, for example. "If you think sterling will take a big hit again, and that hit will be lasting, you may want to consider whether it's worth your while transferring your pension now," said Moriarty.

Finally, should you have a British pension, ask your provider how you will get paid your pension after Brexit - and if you need to make any arrangements to ensure payment.

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