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BREXIT: pension trustees must be alive to impact of vote on markets, says expert

Out-Law Analysis | 08 Apr 2016 | 10:59 am | 1 min. read

FOCUS: Pension scheme trustees could face harsh criticism or even personal liability if they fail to monitor market movements around the UK's referendum on EU membership.

This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum. Sign up to receive our Brexit updates by email.

Trustees have overall responsibility for the pension scheme's investments. This means that, if they see a potential threat or opportunity for the scheme's investment strategy, they should be ensuring that it is appropriately investigated.

Investment experts are speculating that a vote to leave the EU would lead to major short-term market disruption: sharp drops in sterling, sharp rises in gilt yields and stock market plunges have been predicted. Longer term predictions about investment trends after a vote to leave the EU differ more widely, but clearly markets would take a very different course both in broad sweep and in detail from what would be expected following a vote to remain in the EU.

Trustees are not just bystanders in this process. They should be instructing their investment advisers now to consider what changes, if any, they should be making to their investment strategy in the short to medium term.

The trustees owe a duty of care to pension scheme members in relation to investment matters that is breached if they are shown to have been negligent. If the pension scheme was to suffer losses as a result of entirely foreseeable market movements that the trustees had failed to address, they could be vulnerable to criticism from the membership – or even personal liability.

Alastair Meeks is a pensions law expert at Pinsent Masons, the law firm behind Out-Law.com.