A yes vote for Scottish independence could have substantial funding implications for pension scheme sponsors, according to a report published today by the Institute of Chartered Accountants of Scotland.

Scottish independence would also require the creation of a separate Pension Protection Fund, the accountancy body said in Scotland's pensions future: what pensions arrangements would Scotland need?
Under European Union solvency requirements, schemes operating across an independent Scotland (assuming it joins the EU) and the rest of the UK would be classed as 'cross-border' and therefore subject to a host of new rules. These include having to fully fund their liabilities at all times and eliminate deficits immediately, rather than through a staged recovery plan as is currently the case for UK schemes.
'The potential impact on funding requirements for employers operating defined benefit or hybrid schemes across the UK is likely to be substantial, although we have not been able to ascertain the number of schemes which would be affected,' the report said.
Employers would also have to conduct annual, rather than triennial actuarial variations, placing an additional regulatory and cost burden on schemes, it added.
In the immediate aftermath of a 'yes' vote, the Scottish Government should continue with existing UK arrangements for pensions regulation, the report said. However, it highlighted specific challenges with pension protection which meant separate arrangements would eventually be needed in this area.
'Protection arrangements may need to operate separately for Scottish-based and rest-of-the-UK-schemes to reflect the existence of two separate countries, two bodies of law and the impact of EU solvency requirements, which may have different implications depending on whether an independent Scotland's membership of the EU remains unbroken,' ICAS explained. 'Also, schemes which continue to operate across border would need to be accommodated within the new arrangements.'
'Assuming that separate protection arrangements would be required, at some future date, if not immediately after independence in the event of a "yes" vote, a separate Scottish protection fund would need to take over the assets and liabilities of Scottish pension schemes which had transferred previously to the UK PPF, as well as the net investments and returns to date on those schemes' assets,' it added.
A 'yes' vote would also raise questions over which government would be responsible for the state pension entitlements of Scots built up prior to independence, as well as how to deal with £86bn of public sector pension liabilities related to Scotland, the report noted.
ICAS called on the Scottish Government to develop a 'robust' plan for Scotland's pensions future in the lead up to next year's independence referendum, and for the UK government to also assess the implications a 'yes' vote would have for pensions in the rest of the UK.
David Wood, ICAS executive director for technical policy, said: 'Both governments have a duty to engage with citizens and other pensions stakeholders to prepare a way forward, in advance of the referendum, and agree transitional arrangements to be implemented in case of a "yes" vote.'