An independent Scotland would find it more difficult than the UK to pay for state pensions and could be forced to increase taxes to fund the bill because the Scottish population is ageing more quickly, the Pensions Policy Institute has claimed.
With three months to go before the September referendum, the think-tank submitted evidence to the Scottish Parliament Finance Committee. Its briefing note examined the implications for government spending on state pensions and the implications for pensioners in Scotland.
PPI evidence highlighted significant differences in estimates of life expectancy within the UK and the effect this would have on the rise in the state pension age. In England, 2032 is the trigger year in which the SPA would need to increase to 68, but this would not happen until in 2045 for Scotland.
The think-tank added that if an independent Scotland retained the same SPA and state pension policy as the rest of the UK, paying for state pensions would be more difficult, with higher state pension expenditure being funded by a smaller working-age population.
The Pensions Act 2014 implements a new single-tier state pension from April 2016 that will replace the current Basic State Pension and the second state pension. It contains a process for future increases in state pension age.
Under UK government plans, announced in the Autumn Statement, the pension age will be raised to 66 by 2020, then to 67 between 2026 and 2028.
But the Scottish Government has said it would not increase the retirement age beyond 66. This would further increase state pension costs in Scotland, the PPI note stated.
Despite lower life expectancy levels overall for Scotland, the population is ageing more quickly than the rest of the UK, and increasing faster relative to the number of working age people, the PPI added.
PPI director Chris Curry said: 'The increased state pension spending implied by the plans of the Scottish Government is not necessarily unaffordable.
'However, the Scottish Government would need to either raise higher revenues (for example through taxation), reduce spending in other areas (for example where demographic pressures are less), or have higher government debt levels.'
