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  • August 2014
08

Scottish independence timetable 'too short', Buck warns

Open-access content Monday 18th August 2014 — updated 3.56pm, Monday 4th May 2020

The timetable for Scottish independence does not give businesses enough time to make the necessary changes to workplace pension arrangements and would be significantly worse for companies that operate cross-border, according to a new white paper by Buck Consultants.

With a month to go before the Scottish independence referendum on September 18, the global HR benefits and human resource consulting firm today published its Coping with the issues report, outlining the key issues for workplace pensions that would arise from a 'Yes' vote.

It identified two matters that could call into question the continued viability of remaining defined benefit provisions. These are: EU membership and the terms that would apply to both an independent Scotland and the 'remainder' UK; and the currency that an independent Scotland would use.

The white paper noted that businesses with operations in both independent Scotland and rUK, which run a single workplace pension scheme covering employees on both sides of the border, might be subject to further requirements would have to split the scheme into two parts.

This will change future workplace provisions significantly, the white paper noted, adding that following a split, schemes that overlap the border are unlikely to be replaced by new schemes on a DB basis.

Steven White, managing director for Europe at Buck Consultants, said: 'Amongst all the arguments for and against an independent Scotland, one thing we can be confident of is additional costs, both to defined benefit and defined contribution schemes, which may suffer reduced economies of scale.

'The cost of making the changes necessary to pension arrangements is likely to fall across employers and employees on both sides of the border.'

Independence is expected to be formally implemented by the Scottish Government on March 24 2016, only 18 months after next month's vote. But this 18-month window was not sufficient to make the necessary changes, Buck warned.

It said that the remaining DB schemes in rUK would also be at risk, 'sparked by the catalyst of splitting and the probable desire to harmonise benefits across the whole workforce of the business'.

'Given the importance of economic issues to a successful divorce, the impact on workplace pensions should feature strongly in considering Scottish independence,' White said.

'With 5,000 businesses operating in Scotland and owned outside, covering 35% of Scottish private sector employees, the potential implications are significant. The new requirements may mean that future workplace provisions will have to change considerably so the challenges will need to be addressed.'

This article appeared in our August 2014 issue of The Actuary.
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