Actuaries have urged the Scottish Government to set out more details of its plans for spending on the state pension if the country votes for independence next year.
In a commentary on Scottish independence, the Institute and Faculty of Actuaries today said there were a number of questions that could have an impact on provision of financial services in the country if it leaves the UK.
The referendum on Scottish independence will take place on September 18 next year.
Among the issues raised by the IFoA was a call for Holyrood ministers to produce more information on what proportion of government spending would be committed to pensions.
'Whilst the Scottish Government has set out some of its objectives in providing a Scottish state pension, further clarity on what proportion of Scotland's gross domestic product should be made available for pension payments would be welcomed,' the commentary stated.
The paper highlighted that, for the first term of a post-independence Scottish Parliament, the current government had committed to retain the UK government's triple lock. This commits ministers to increasing the state pension by whichever of annual earnings growth, inflation or a 2.5% baseline is highest.
However, the report warned this could lead to reluctance to remove the triple-lock, even if it is necessary to do so. In addition, a period of high inflation could lead to 'unanticipated payments'.
The paper also highlighted Holyrood's commitment to review the UK government's planned increase in the state pension age, which could make other increases difficult to implement.
Although this would be an opportunity to establish a state pension age that reflects the longevity characteristics of Scotland's residents, increasing the age has 'long been a political nettle', it warned.
'There is a danger that a future government would use state pension age as a populist tool to avoid making difficult and unpopular long-term funding decisions
'A delay in accepting the 2026-28 [age] increase may make future increases more difficult to implement, particularly within the early years of a newly independent Scotland.'
The IFoA also highlighted what it called two significant areas of uncertainty in any post-independence settlement: whether Scotland remains a member of the European Union and whether it retains Sterling as its currency, which is the current position of the Scottish Government.
For example, regulation of the Scottish insurance industry after independence needs to be seen in the context of the proposed Solvency II regulations for risk governance and capital adequacy across Europe. 'Again, this emphasises the importance of having clarity with regard to Scotland's relationship with the EU,' the report stated.
Publishing the paper Martin Potter, leader of the Scottish Board at the IFoA said: 'Scotland becoming an independent country would have a significant impact on financial services, including pensions and insurance, the regulation of the sector and its future growth. As an independent professional body with a Royal Charter the IFoA has a public interest duty to uphold. In raising questions that it believes to be pertinent, the IFoA looks to serve the public interest by informing the debate on these important issues ahead of next September's referendum.
'Whether a referendum results in an independent Scotland or not, it is right that discussion about how change could affect Scotland happens now. This paper considers some of the key challenges facing financial services in an independent Scotland.'
