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  • January 2014
01

Pensions questions remain for independent Scotland, say accountants

Open-access content Monday 3rd February 2014 — updated 5.13pm, Wednesday 29th April 2020

The Scottish Government has failed to answer key questions on the impact independence would have on pensions, an accountancy body warned today.

An Institute of Chartered Accountants of Scotland report called on the Scottish Government to do more to clarify its position on the details of how pensions will be provided in an independent Scotland ahead of the referendum on September 18. ICAS said important questions remain on how legacy issues will be resolved as well as how new arrangements would be implemented.

In a bid to address such uncertainties, the Scottish Government published a white paper in November on the impact of financial services in the country if it leaves the UK.

The paper proposed increasing the state pension to £160 per week in 2016/17, the first year of independence. It also revealed that it would continue the rollout of auto-enrolment to help address the decline in private pension saving.

However, David Wood, ICAS' executive director, technical policy and practice support, said: 'The paper [provided] useful additional detail in relation to pension regulation and provision in an independent Scotland, but some of our key questions remain unanswered'.

ICAS said it still remained unclear as to how theScottish and UK governments would engage with the European Union on how to minimise the impact of the 'cross-border funding' rules on defined benefit schemes carrying deficits.

The accountancy body said the three-year transitional period being discussed by the Scottish Government for addressing pension deficits held by cross-border schemes was likely to be 'wholly insufficient'.

As such, further concerns were raised about the feasibility of an independent Scotland sharing pension protection arrangements with the UK while at the same time establishing a separate pension regulator.

It added that it anticipated 'additional complexity' in relation to whether an individual's entitlement to a state pension at the date of independence would sit with an independent Scotland or with the UK. The accountancy body added that similar issues arise in respect of entitlement to a pension from an unfunded public sector pension scheme.

Wood said: 'While we recognise that it will not be possible to answer every question prior to the referendum, nevertheless important questions remain on how legacy issues will be resolved and new arrangements will be implemented.'

Last year, both the Institute and Faculty of Actuaries and the National Association of Pensions Funds identified a number of challenges Scotland and the rest of the UK would face should independence go ahead.

 

This article appeared in our January 2014 issue of The Actuary .
Click here to view this issue

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