Merchant Navy Officers Pension Fund

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01Jul16

Impact of EU Referendum on the MNOPF

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Much has been said and written since the referendum result for the UK to leave the EU. This short paper does not seek to add to that external commentary and, in particular, on the potential implications for the economy and pensions in general, but focusses on the implications on the MNOPF, our members and their benefits.

Since the referendum result the MNOPF funding level has remained largely unchanged and the Fund also has a proven and effective governance and decision making structure in place to consider, and take advantage of, investment opportunities as they arise. I am not anticipating any immediate changes to the MNOPF investment strategy and I am pleased to report that nothing of significance has been immediately identified as requiring urgent action.

What does Brexit mean for pensions legislation?

In the short term, there are little changes expected in EU pensions legislation and no immediate changes expected in UK pensions legislation. Looking slightly longer term, it is possible that some current pensions legislation inherited from the EU may fall away which would not impact on member benefits but may make the Fund easier to manage.

Shorter term considerations

The MNOPF’s Delegated Chief Investment Officer (DCIO) takes the day to day decisions in implementing the Trustee’s investment strategy. Our DCIO is watching the markets and economic conditions closely to ensure that risk to MNOPF investments is minimised.

Longer term impact

There would appear to be no immediate significant impact on our employer support as a result of Brexit. The broad and diverse employer profile provides some degree of a natural protection against economic, currency and market movements. Although some of our employers may be adversely affected by the Brexit decision, others may benefit.

The Fund is well positioned to cope with this Brexit scenario. Our investments offer protection against movement in interest rates and inflation. We have low volumes of investment in UK shares (less than 1%) and more significant investments in the US which have not been adversely impacted by the UK stock market dropping or by changes in the value of sterling. The Fund is, therefore, well prepared to weather the current turmoil.

Andrew Waring – 29 June 2016

 

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