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Pensioners could lose thousands of pounds following Brexit, Treasury warns

Credit: PA

Pensioners could be thousands of pounds worse off if the UK votes to leave the European Union, the Treasury has warned.

Brexit would cause inflation to rise, eroding the value of state pension increases, meaning that someone on the state pension would lose between £137 and £142 per year, depending on how severe economic shocks were.

If we leave the EU, it is simply not credible to suggest that pensioners or pensions will benefit.

– Pensions minister Baroness Altmann

Those with an additional pension pot of £60,000 would see between £1,900 and £5,200 wiped off its value by next year, analysis by the Treasury warned.

The total value of assets held by the over 65s would drop by between £170 billion and £300 billion as a result of economic shocks, the Treasury warned.

However, former Work and Pensions Secretary Iain Duncan Smith - who is backing Brexit - dismissed the report as "outrageous".

The biggest threat to British pensions is the European Commission's proposals to undermine occupational pensions which the Government themselves have described as 'damaging and reckless'. Meanwhile tax proposals from eurozone countries will wipe billions off British assets hitting pension funds hardest.

The real risk in this referendum is to stay in the EU, handing more money and power to Brussels.

– Former work and pension secretary, Iain Duncan Smith
Former work and pension secretary, Iain Duncan Smith Credit: PA

Older voters are more likely to vote in elections and polling currently indicates that they are more likely to back Brexit, meaning they are key targets for both the Remain and Leave campaigns ahead of the June 23 referendum.

Those aged 50 to 55 would be hit even harder than current pensioners, the analysis warned. Anyone hoping to retire around 2030, who is currently on average wages, with pension savings of £20,000, and who is contributing eight per cent of their earnings into their pension fund could see between £3,800 and £5,800 lost from its value. In retirement they would be between £223 and £335 worse off.

Pensioners who have worked hard all their lives deserve dignity, security and certainty in retirement. That's what we all hope for and what any responsible government should seek to provide.

As Chancellor, I feel very strongly that my first responsibility is for people's jobs, livelihoods and living standards.

I couldn't recommend something that we know would put all that at risk.

– Chancellor George Osborne
Chancellor George Osborne Credit: PA

Speaking today, Mr Duncan Smith warned that pensioners could lose "dramatic sums of money" if the UK stays in the EU. He claimed a planned EU solvency directive is "coming down the tracks" and could cost British pensioners £400 billion.

On BBC Radio 4's Today programme the former Cabinet minister also claimed that EU plans to harmonise regulation of occupational pensions were still on the table and could be passed without British support under qualified majority voting rules.

What does that mean? It means if you go to the Council of Ministers and you are only one nation alone, even if you have a couple, you cannot stop this.

That means the only way to save pensions is to vote to leave the European Union because then it won't apply to the UK.

Both of those (regulations) could cost pensioners dramatic sums of money.

– Former work and pensions secretary Iain Duncan Smith

For people on the state pension, rising prices would mean an end to inflation-busting increases in their income.

The triple-lock means that the state pension rises every year by the highest of inflation, earnings growth or 2.5%.

But with inflation forecast to be around 2.5% a year after Brexit, the increase will only keep pace with prices rather than rise above them.

In an illustration of the link between the wider economy and pension assets, the Treasury highlighted the 10% fall in their value in the 1990 recession and the 15% drop in 2008 at the time of the financial crash.

It's not rocket science. Brexit means uncertainty. That spooks markets.

A fall in equities and in sterling is undeniable - the only question is by how much and for how long. That's going to hit people's pensions.

– Mark Wilson, chief executive officer at financial giant Aviva