The income of 135,000 Irish residents who hold British pensions could be hit if the United Kingdom votes to leave the European Union.
Voters go to the polls in the Brexit referendum next Thursday and experts predict the value of sterling will decline sharply if the United Kingdom opts to leave the EU.
About 135,000 Irish residents currently receive a British state pension, according to the Department of Social Protection. An estimated 70,000 of these are also in receipt of a private British pension.
If Britain leaves the EU and sterling drops relative to the euro then the value of a sterling pension would be lower in euro terms, according to a source at a large human resources firm.
“For anyone currently living in Ireland and in receipt of a pension from the UK, they could expect to see falls in their retirement income. In addition, any market uncertainty following the referendum (whether passed or not) may well lead to significant fluctuations in the level of their pensions in the short to medium term,” they said.
“Ultimately, Brexit is likely to lead to greater uncertainty for individuals who hold pensions in the UK but live in Ireland. Indeed, we have seen significant market fluctuations in the run-up to the referendum.”
The risk to pension holders depends in large part on how much of their career was spent in the UK. Irish Association of Pension Funds chief executive Jerry Moriarty said Irish residents who spent only a few years working in the UK are unlikely to face much risk because their British pension would form only a small part of their income.
“Different are people who would have emigrated back in the 1950s or 1960s and spent most of their time in the UK and then came back here when they retired,” he said. “If all your retirement income is coming from the UK then there’s a problem, but it’s not really one you can fix in any way.”
Mr Moriarty said younger people entitled to future pensions from the UK could consider transferring their pension pots to Ireland but this option would not be open to everyone.
However, he said that British pension holders living in Ireland should be familiar with changes in the value of their pensions by now. “Sterling and the euro have fluctuated so much over the past 10 or 15 years anyway it’s probably just something people are used to.”
He added that the “bigger issue” around Brexit concerns its possible impact on investment markets. “If they vote to leave you’re likely to see a lot of volatility on stock markets and bond yields. That’s probably a more immediate concern and there’s some evidence that people have been moving to safer type assets to ensure they don’t get overly impacted.”
Banks Goldman Sachs and HSBC have said Britain leaving the EU could knock 11 per cent or 20 per cent respectively off the value of the pound. A Financial Times poll of polls on Friday put 48 per cent of voters in favour of leaving the EU compared with 43 per cent in favour of remaining.
