3 Pensions
The State Pension
10. The UK has provided a state pension
since 1909, after the Old Age Pensions Act 1908 introduced basic
provision for people of 70 years or over who could not afford
to provide for themselves.[12]
Since then, successive governments of all shades have maintained
a commitment to a state pension, which has expanded to cover everyone
in the United Kingdom who has satisfied the contribution conditions.
11. Old age pensions matter hugely to
Scots. Over 1 million Scots, virtually one in five of the population,
are in receipt of an old-age pension today, and that number is
forecast to grow in absolute terms and in comparison to the working-age
population in the coming decades. Total expenditure on pensioner
benefits in Scotland is at present £9.6bn a year and this
is higher per capita than the UK average,[13]
reflecting not just the age structure of Scotland's population
but the individual needs of Scottish pensioners.[14]
As the UK Government's Scotland Analysis Paper on Welfare and
Pensions points out, "Expenditure on pensioner benefits is
almost £80 higher per working-age person per year in Scotland
than in the UK. This differential increases over the next 20 years
to almost £200."[15]
12. The UK Government has recently legislated
to bring about changes to the State Pension, which it said were
intended to simplify and modernise the system and mitigate the
rising costs associated with an ageing population.[16]
The old twin-track system of the Basic State Pension and Additional
State Pension (whose various iterations include the State Earnings-Related
Pension and the State Second Pension) is being replaced by the
Single-tier Pension, which will apply to individuals who reach
retirement age on or after 6 April 2016. The new pension, which
will be no less than £148.40 per week (with the actual amount
to be set in autumn 2015) will be available to those who have
contributed to the National Insurance system for 35 years, either
through in-work payments or through National Insurance Credits
gained, for example, while on unemployment benefits.[17]
In addition there is an increase in the State Pension Age (SPA),
which remained fixed at 60 for women and 65 for men between 1948
and 2010, but which is changing to see an equalization at 65 in
December 2018, and then rises to 66 by October 2020 and 67 between
2026 and 2028.[18]
13. The Scottish Government have welcomed
elements of the new state pension reforms; however, they also
say that after separation they would make the pension system more
generous in various ways:
- maintaining provision for those
expecting to receive a state pension based on their spouse's contributions
for 15 years after the introduction of the single-tier pension;[19]
- keeping the Savings Credit element
of Pension Credit for new pensioners on low incomes, and then
increasing it in line with earnings;[20]
- guaranteeing the 'triple-lock' on
increases to the Single-tier Pension, the old Basic State Pension
and the Guarantee Credit element of Pension Credit, initially
for the first term of an independent Scottish Parliament (the
triple-lock means pensions will increase by whichever is the highest
of the rate of inflation, the increase in average earnings, or
2.5 per cent);[21]
- setting the full rate of the Single-tier
Pension at £160 per week (£8,320 per annum), or matching
the UK rate if this is higher;[22]
- "reserving judgement"
on the increase in the SPA to 67, and establishing an independent
commission to look into the appropriate age for Scotland.[23]
14. Taken together, these changes might,
if they could be delivered, represent a more generous state pension
settlement than that being rolled-out by the current UK Government.
However, generosity comes at a price, and the likely costs of
such a system must be clearly laid out. For example, on the Scottish
Government's proposal for a higher pension rate than that currently
indicated by the UK Government, the recent Scotland Analysis
paper on welfare and pensions cites DWP data indicating that,
for every additional £1 in the starting level of the Single-tier
Pension, the costs to Scotland could be in the region of an extra
£50 million a year in around 20
years' time.[24]
15. On the proposal to continue with
Savings Credit—which is being discontinued in the UK—the
paper goes on to point out that this could prove both costly and
unnecessary for a separate Scottish state. In 20 years' time,
the cost of maintaining this benefit could be in the region of
£200 million a year (in current prices), while the paper
points out that Savings Credit was introduced in order to provide
a means-tested reward for those with only modest savings, while
the new Single-tier Pension rate is deliberately set above the
basic level of means-tested support.[25]
16. Meanwhile, on the issue of the triple-lock,
since the publication of the Scottish Government's pledge there
has been a growing consensus among the three largest parties at
Westminster that the triple-lock should be kept in place for the
State Pension beyond the 2015 general election.[26]
State Pension Age
17. The Scottish Government have taken
to arguing that the State Pension Age should be lower in Scotland
than in the UK as a whole, because on average life expectancy
is lower in Scotland. This is an outrageous argument. An individual's
entitlement to the state pension should not depend on the life
expectancy of his or her neighbours. There are very wide variations
within Scotland on life expectancy, from extremely good to the
wholly unacceptable.[27]
Simply to look at the average life expectancy is to ignore these
patterns; if the Scottish Government's argument were to be accepted,
pensions age would logically have to change depending on which
part of Scotland someone lived in. Moreover, to set pension age
on the assumption that Scots will continue, on average, to die
younger than people elsewhere in the UK seems to us to be a doctrine
of despair and to show no confidence that a separate Scotland
could do anything to affect these unacceptable health outcomes.
18. It is important to note that the
Scottish government are not promising to set a lower state pension
age than the rest of the UK in the event of separation: they are
merely proposing to "reserve judgement on the UK government's
timetable for the SPA increase to 67 between 2026 and 2028".[28]
But if separation were to occur and a decision were ultimately
taken to abandon the increase to 67, the UK Government estimates
this would cost people in Scotland around £6 billion between
2026/27 and 2035/36 and could see around £9 billion lost
in GDP as people leave the labour market earlier than they would
otherwise have done.[29]
Dependency Ratio
19. The potential costs of not increasing
the SPA in line with the rest of the UK cannot simply be ignored,
nor can the particular demographic challenge that Scotland faces
over the coming decades. At present, pensioners make up 19.8 per
cent of the population of Scotland compared to 19.2 per cent in
the rest of the UK. By 2032, this gap will have almost doubled,
with Scotland's pensioners making up 22.0 per cent of its population
compared with 20.8 per cent in the rest of the UK.[30]
Obviously a very important factor in considering whether state
old-age pensions are affordable is the so-called age dependency
ratio, that is to say the number of pensioners as a proportion
of the number of people of working age. This is because it is
people of working age who pay the taxes from which pensions are
met. This is the essence of national insurance. All across the
Western world, this ratio is changing, as life expectancy increases,
and because of the present age structure of the population. This
affects the United Kingdom, though not as acutely as some other
European countries. But it is, as we have seen, particularly important
for Scotland. Scotland's future higher age dependency ratio has
very significant consequences for the affordability of old age
pensions. The Scottish government have been very reluctant to
acknowledge this reality.
20. Indeed,
the Scottish Government were rebuked by the UK Statistics Authority
(UKSA) over their treatment of dependency ratio projections. In
Pensions in an Independent Scotland, the Scottish Government argued
that Scotland's dependency ratio will remain lower than that of
the UK until around 2026, beyond which they will begin to converge.
By 2035, they claim that the dependency ratio will
be "…645 dependents per 1,000 working-age adults, compared
with 639 dependents per 1,000 working-age adults in the UK as
a whole."[31] However,
the UKSA notes that the Scottish Government choose to look at
the overall dependency ratio, which includes children and people
of pension age relative to working-age population, ignoring the
age dependency ratio for just those of pension age. Because the
dependency ratio for children is lower in Scotland than the UK
(as there are fewer children per working-age person in Scotland)
and is expected to remain so for many years, combining this figure
with the age dependency ratio therefore paints a more favourable
picture. If we look just at the dependency ratio for those of
pension age, a substantial gap opens up between Scotland and the
UK (to Scotland's disadvantage) well before 2035.[32]
21. If Scotland chooses to remain part
of the United Kingdom, these risks will be shared across the whole
UK as they have always been. If it chooses to become separate,
then the age dependency ratio represents a significant challenge
for any future government of a separate Scottish state, which
will have to find a solution to this looming problem, or potentially
face substantial extra costs, which will most likely have to be
funded through spending cuts to other areas of the state budget
or through tax increases. The Scottish Government's preferred
approach is to try and increase the number of working-age people
living in Scotland contributing to the economy. As the Scottish
Government's own White Paper on separation makes clear, one of
the main ways it proposes to achieve this is by promoting immigration:
An independent Scotland can address
population growth by creating new opportunities for young people
to build their careers and families within Scotland, and through
action to attract the right people with the right skills to Scotland
- either Scots who have moved away or new migrants.[33]
Mass Immigration?
22. In his evidence to the Scottish
Affairs Committee on 6 May 2014, the Minister of State for Pensions
was asked how much immigration would be required in order to make
up the gap in spending caused by Scotland's less favourable demographics
and higher spending commitments: "The short answer is implausible
levels. At any plausible level of migration, there is still a
significant hit on the working-age population."[34]
He provided some figures which take into account the cost of the
Scottish Government's promises on pensions, other working-age
welfare commitments (which we will consider in more detail in
the next chapter) and demographic pressures. To begin with, the
promises on increased pension benefits discussed above amount
to an extra cost to Scottish taxpayers of £210 per working-age
person per year:
If you add the demographic pressures—an
ageing population and all of that relative to the working population—that
is another £200, so you end up at £410 just on the pensions
side. We think there is about another £40 on the working-age
side. I will come back to migration in a second, but our headline
number is £450 per working-age person to pay for demographics
and the Scottish Government's promises.[35]
23. Assuming a higher level of net immigration,
of around 15,000 people per year, the cost per working-age person
only comes down to £420, explaining the Minister's claim
that "implausible" levels of immigration are required
to neutralise the extra costs.[36]
24. This view is backed up by comments
made by David Phillips of the Institute for Fiscal Studies, in
which he pointed to longer-term economic factors which would negate
the impact of even very high levels of migration:
We looked at the high migration
forecasts, which roughly had migration three times as high: rather
than 9,000 people a year inward migration, 27,000 a year. We showed
that that was not enough to close the fiscal gap that opened up
in Scotland. In part that was because of greater ageing, but it
was mostly because of the declining oil revenues in the long term.[37]
25. The Scottish Government has set
out a policy of increasing migration into Scotland so as to promote
economic growth and make their policies more affordable. However,
they have not acknowledged the challenges associated with the
scale of migration that would be necessary. For many years Scotland
has been a net exporter of population, and it is good news that
in the most recent years Scotland has been attracting more people
than have left. But migration requires careful management, especially
for its effects on public services, such as schools. Even the
highest estimates of likely additional migration which we have
seen, such as those by the IFS, would be very challenging indeed
to manage; and yet these levels are still not enough to address
the affordability problems in relation to old age pensions which
are thrown up by separation. Net inward migration of 27,000 a
year over the first two decades of separation, the highest figure
covered in projections by the IFS, would mean taking into Scotland
migrants on a scale almost equivalent to the population of the
city of Edinburgh.
26. Dr David Comerford of Stirling
University, who gave evidence to us, has subsequently made public
his estimates of the amount of immigration that would be needed
to put Scotland in the same position as the UK as a whole in relation
to the affordability of old age pensions.[38]
All such projections are subject to uncertainty, as they depend
on assumptions especially about migration which can only be verified
after the event. Dr Comerford's estimate was that over the decades
after independence, each year Scotland would have to have net
migration of 23,000 people in order (on certain assumptions) to
be in the same position as the UK as a whole. He describes this
additional amount of migration as "relatively modest",
but it would be a major change from Scotland's historical experience
of net emigration. Over each six years, it would mean adding a
city the size of Dundee to Scotland's population.
27. Migration into Scotland is something
which should be discussed in rational and moderate terms, and
the fact that in the most recent couple of years, Scotland's population
has grown is something we welcome, as we welcome those from the
rest of the UK, the EU and elsewhere who choose to settle in Scotland.
But we have serious concerns that the affordability of pensions
in a separate Scotland is predicated on sustained immigration
over many decades. The consequences of that for a range of issues,
including public services such as education and health, and housing
supply, and for public opinion, would have to be carefully thought
through, before we set off down such a road. Within the UK, that
is not an issue we are forced to address simply to be sure of
being able to afford our welfare state. The Scottish Government,
however, are simply unwilling to discuss the costs and challenges
associated with such a high level of net immigration, and have
set out no plans for how it would be managed. This is deeply irresponsible,
as well as misleading. It is also probable that in the long term
new migrants may themselves add to pension costs.
28. It is also important to consider
the potential knock-on effects the Scottish Government's proposals
may have in other areas. A separate Scottish state would certainly
have the right to pursue its own immigration policy and seek to
encourage more people of working age to come and live in Scotland.
However, this must be considered in the light of the Scottish
Government's stated aim, in the event of separation, to establish
a Common Travel Area (CTA) with the rest of the United Kingdom
and Ireland along the lines of that currently in operation.[39]
At present, the CTA operates on the principle of broad harmonisation
of immigration policy amongst its constituent countries and regions.
As the Immigration Minister James Brokenshire MP made clear to
us previously, any move by a newly separated Scottish state to
enact a markedly different immigration policy—i.e. encouraging
substantially more people into the country—could prompt
the Government of the continuing UK to seek to maintain the integrity
of its own immigration policy and thus to implement an entry policy
on the Scottish border, effectively precluding anything like the
present CTA.[40]
Complexity of Pension Liabilities
29. The Scottish Government has made
a commitment to take on its share of responsibility for state
pension liabilities in the event of separation:
…for those people living in
Scotland in receipt of the UK State Pension at the time of independence,
the responsibility for the payment of that pension will transfer
to the Scottish Government […] for those people of working
age who are living and working in Scotland at the time of independence,
the UK pension entitlement they have accrued prior to independence
will form part of their Scottish State Pension entitlement. Any
pension entitlement accrued in Scotland after independence would
also form part of that Scottish State Pension. On reaching the
State Pension Age, their Scottish State Pension would be paid
by the Scottish Government.[41]
30. For those who have accrued rights
to a Scottish state pension, but who retire outside Scotland,
the Scottish Government propose either to establish their own
equivalent of the International Pensions Centre (which offers
advice about the UK State Pension for those living overseas),
or that the pension should be paid by the relevant institution
of the country of residence concerned. For those who have built
up state pension entitlements in a range of countries, the Scottish
Government says that "…the current situation will continue.
The only difference will be that, from independence, pension entitlement
accrued from working in Scotland will be to the Scottish State
Pension, rather than to the UK State Pension."[42]
The UK Government has however pointed out that Scotland may be
liable for a greater share of the cost of pensions payable to
UK pensioners living overseas.[43]
31. In a letter to the Committee following
his evidence session, Steve Webb noted that responsibility for
state pension liabilities would be a subject of negotiation between
the UK and Scottish Governments in the event of a 'yes' vote in
the referendum. However, he also made clear the responsibilities
that would most likely fall upon the Scottish Government:
While there are to be no pre-negotiations,
I would think the Scottish people would expect their Government
to take on full responsibility for paying pensions to people in
Scotland including where liabilities had arisen before independence.
Similarly people in the rest of the UK would not be expecting
to guarantee or underwrite the pensions of those living in what
would then have become a separate country. The security and sustainability
of pensions being paid to people in Scotland would, therefore,
depend on the ability of Scottish taxpayers to fund them.[44]
32. Aside from the share of liabilities,
however, there is also the technical issue of how to separate
out Scottish cases from those related to the continuing UK. The
UK Government's recent Scotland Analysis paper suggests that "…a
system of complex bilateral arrangements would be needed for many
years making it more difficult for individuals to work out their
State Pension entitlement."[45]
33. Given the expected decline in
oil revenues and the projected higher number of dependents to
those of working age in Scotland compared to the UK, the Scottish
Government must provide more detailed costing of their proposed
changes to the new Single-tier Pension settlement. In addition,
we recommend that the Scottish Government bring forward their
decision on whether or not to raise the SPA to 67 in the event
of separation. The UK Government has already taken this step,
and enough information already exists for the Scottish Government
to be able to state clearly what it would do, given the choice.
Greater certainty on this vital issue is essential, if voters
are to be given the opportunity to make an informed choice.
Public Sector Pensions: Who Pays?
34. The Scottish Government
has stated that it will take on a share of the UK's public sector
pension liabilities in the event of separation.[46]
It has sought to assure people that there "will be no difference
to how much people pay for their pensions or the level of benefits
they receive as a result of the move to independence".[47]
However, this is not inevitable and will be dependent upon decisions
taken by future Scottish Governments. The Scottish Government
also argues that the necessary infrastructure to administer public
sector pensions already exists in the form of the Scottish Public
Pensions Agency[48].
However, this deals only with certain public sector pension schemes
notably those for teachers and NHS workers.[49]
New arrangements would have to be made for others, such as civil
service pension schemes.
35. The UK Government has estimated
Scotland's share of public sector pension liabilities to be in
the region of £100 billion.[50]
A large proportion of public sector pensions are unfunded, meaning
there is no dedicated set of assets or pot of money set aside;
rather, today's workers pay for today's pensioners with, if need
be, taxpayer support. The recent Scotland Analysis paper argues
that the UK as a whole is better placed to shoulder the risks
associated with large unfunded schemes like those for the NHS
and teachers,[51] while
Steve Webb told us that, in 2013-14, pension schemes for Scottish
teachers and nurses received £1.7 billion in contributions
from current workers and employers, but paid out £2 billion,
leaving a £300 million funding hole that had to be filled
by the UK taxpayer. By 2018, the gap is set to double to £600
million.[52] While Scotland
is not unique amongst the regions of the United Kingdom in requiring
such support for pensions in payment, it is a fact that cannot
be disregarded when considering the Scottish Government's proposals.
36. As with state pension liabilities,
Mr. Webb also raised the problem of disentangling or disaggregating
public sector pension liabilities in the event of separation.
This could lead to problems in determining which state—the
continuing UK or Scotland—would be liable for paying out:
If I am a member of the civil service,
whether I work … in Dundee or in Burnley does not matter—I
am building up the same rights. We may not even know, for example,
where somebody was when they did the work, if they are in a UK-wide
scheme […] The difficult thing to disentangle would not principally
be the level of the pension right you had already built up—we
have a figure for that; it would be who pays the bill. That would
be the source of endless negotiation and take years to disentangle.[53]
37. It is clear that the process
of disentangling Scottish and UK-wide public sector pensions,
and negotiating responsibility for their payment, will be a lengthy
process. It could take years to resolve these questions.
Occupational and personal pensions:
Who regulates?
38. Of course, people
in the UK also save for their retirement through occupational
or personal pensions. For all such schemes a stable, fair regulatory
environment is essential, as individuals and companies are planning
for the very long term. UK governments of all political persuasions
have recognised this, and have also given people incentives through
the taxation system to save for the long term in this way. Indeed,
in an effort to ensure that more individuals save for their retirement,
the UK Government has recently introduced changes requiring the
automatic enrolment of employees onto occupational pension schemes.
This policy is being rolled out gradually and should reach all
firms by 2017-18.[54]
The Scottish Government has accepted auto-enrolment as a necessary
measure to increase levels of individual saving for retirement
and has pledged to continue the policy in the event of separation.[55]
39. In introducing auto-enrolment, the
UK Government recognised that some smaller businesses might face
difficulties in signing their employees up to private pensions.
To pre-empt such market failure, the Government has established
the National Employment Savings Trust (NEST), which has a legal
obligation to take on all savers, regardless of the size
of their investment. The Scottish Government have stated their
desire to maintain access to the scheme for Scottish workers in
any transitional period following a 'yes' vote in the September
2014 referendum.[56]
However, their longer term goal is to establish a Scottish equivalent
that would take on similar responsibilities in a future separate
state.[57]
40. Steve Webb gave us evidence about
the potential for a Scottish version of NEST, arguing that it
would struggle to achieve similar value for money to the current
UK scheme, given that it would be operating at approximately one
tenth of the scale of the present plan. He also raised the prospect
of a lengthy wait for the establishment of a Scottish NEST, based
on the experience of the UK scheme:
We had the Turner commission over
a decade ago. NEST was only set up in 2012. We—the Government—had
to lend NEST hundreds of millions of pounds to get started. We
had to negotiate it with the EU, because of state-aid issues.
Setting up a Scottish NEST would require, first, a lot of money
up front, and secondly, negotiation with the EU—if they
were in the EU.[58]
41. Given these potential problems in
setting up a Scottish NEST, with nowhere for employees of small
businesses to go, Steve Webb warned that the whole process of
auto-enrolment could come "to a grinding halt".[59]
42. Some other aspects of the Scottish
Government's proposals on occupational pensions are also found
wanting when scrutinised in greater detail. A key problem is the
underdeveloped, speculative nature of some of the Scottish Government's
proposals on occupational pensions. For example, their document,
Pensions in an Independent Scotland, states somewhat
vaguely:
A future Scottish Government would,
of course, be able to vary arrangements for automatic enrolment
in order to ensure effective implementation of the policy, informed
by analysis of the level of saving needed by people in Scotland
to maintain their standard of living in retirement. In considering
any changes to the current arrangements, it would be important
to achieve a balance to ensure that the level of employee contribution
is not onerous and that the impact on employers, particularly
small and medium-sized enterprises, is proportionate and affordable.[60]
43. Similarly, on the issue of regulation,
the White Paper on separation lacks clarity, making suggestions
rather than firmer commitments:
We consider that the current arrangements
for the protection of individuals' pensions by the Pension Protection
Fund (including its responsibility for the Financial Assistance
Scheme and the Fraud Compensation Fund) should continue, with
Scotland playing our full part. However, it will also be possible
for the Scottish Government to establish a Scottish equivalent
to the Pension Protection Fund. Individuals will have the same
level of protection as they do now.[61]
44. Pension provision is an extremely
important and sensitive issue, affecting every person in the UK.
People understandably worry about the integrity of their retirement
savings and want reassurance and certainty about how their money
will be safeguarded. The Scottish Government's vague and woolly
statements on arrangements for the regulation of private pensions
are therefore of concern to the Committee, and we call for much
greater clarity on exactly what changes the Scottish Government
would or would not make to the present institutions and arrangements.
45. The Scottish Government's policy
documents make other aspirational and vague statements on occupational
pensions. For example, on the subject of providing savers with
more regular and detailed knowledge about their pensions, Pensions
in an Independent Scotland suggests,
A future Scottish Government could
[…] ensure that individualized, accessible Scottish State
Pension forecasts are provided direct to individuals on a regular
basis from early in most people's working lives (for example,
from age 25). Further development of private pension information
could also be encouraged, making it easier to take decisions regarding
any additional pension saving that might be required.[62]
46. The document then goes on discuss
possibilities for financial innovation without actually making
any original product suggestions, "… a future Scottish
Government would be able to work with the pensions industry, employers
and other stakeholders on proposals to develop innovative pensions
and other savings products."[63]
47. Finally, in the same section there
are hints about possible future changes to the tax treatment of
pensions: "While this Scottish Government plans no immediate
changes to the tax treatment of private pensions at the point
of independence, future Scottish Governments will wish to consider
whether adjusting tax relief arrangements would improve incentives
to save."[64] These
examples arguably serve to highlight the privileged position of
the Scottish Government in the referendum debate, in being able
to hint at possible future benefits in a hypothetical Scottish
state, without feeling the need to make concrete promises. Such
vagueness is particularly irresponsible in the area of pensions,
where companies and individual workers have to take decisions
which are of great significance for their personal financial futures,
and have the right to expect that governments will act with a
high degree of clarity and responsibility. This is lacking in
the Scottish Government's vague suggestions about pensions.
48. Setting these aspirational claims
to one side, more practical concerns have been raised about the
Scottish Government's proposals on occupational pensions, compared
to present arrangements. Steve Webb has pointed to the much larger
risk pool represented by the UK and its Pension Protection Fund,
which means that, if a defined benefit pension fund becomes insolvent,
the costs can be absorbed, more easily than they could be by any
potential Scottish equivalent, which would naturally operate at
a much smaller scale.[65]
This is a further example of the benefits of a larger risk pool
provided by the UK.
EU rules on the funding of Cross
Border Pension Funds
49. EU rules have a significant effect
on occupational pensions and would constrain an independent Scotland,
and not only in relation to the issue of NEST mentioned above.
The IORP Directive (Institutions for Occupational Retirement
Provision) is a pan-European prudential framework for occupational
pensions, which includes the requirement that cross-border pension
funds must be properly funded within a two-year time-frame.[66]
In the event of Scottish separation, a new international border
would be created, activating this requirement in relation to current
UK-wide schemes. In his evidence to the Committee, Steve Webb
described a potential scenario:
If you worked in Scotland for a
big supermarket with headquarters in England, potentially you
would immediately become a member of a cross-border scheme. If
that supermarket scheme had a shortfall in it, within the next
couple of years your employer would suddenly have to fill that
gap or do complicated restructuring of the pension scheme. That
is bad news for your employer. There are going to be costs associated
with all of that. The current rules would allow the employer to
fill the deficit over a reasonable length of time. If firms suddenly
have to find that money in the short run, potentially that is
bad news for the business.[67]
50. The Institute of Chartered Accountants
has noted that "EU solvency requirements (as currently interpreted)
would have major cost and cash flow implications for employers
with cross-border defined benefit and hybrid schemes […]".[68]
However, in spite of the potential additional pressure the Directive
could place on businesses to plug gaps in pension funds, the Scottish
Government strike an optimistic tone, recommending that discussions
begin "immediately" to negotiate transitional arrangements
to allow flexibility for companies based in Scotland and the continuing
UK. The White Paper argues that flexibility in interpreting the
IORP Directive would be in the interests of the Scottish and Westminster
Governments, the European Commission, employers and employees
and that other EU Member states already interpret the rules in
different ways.[69] However,
this position seems to us to be little more than unsubstantiated
wishful thinking and provides no security for the individuals
or firms likely to be affected.
51. Uncertainty is inevitable when
a decision as far reaching as the possibility of separation is
being considered, and for some people, no doubt, the possibility
of change is attractive. However, pensions require long-term,
responsible stable government policies, because individuals and
companies are making long-term commitments which matter a great
deal. The Scottish government's approach is apparently to make
ill-defined, uncosted and possibly undeliverable promises. This
can only add to individuals' uncertainty about their financial
future. Scottish ministers are free to make promises, but it is
ordinary voters who may have to pay a price in terms of their
long-term financial security.
12 'Old Age Pensions Act 1908', House of Commons Library
(SN 4817), August 2008. Back
13
Scotland Analysis: Work and Pensions, p 31 Back
14
Scotland Analysis: Work and Pensions, p 30 Back
15
Scotland Analysis: Work and Pensions, p 38 Back
16
Department for Work and Pensions, The single-tier pension:
a simple foundation for saving, Cm 8528 (January 2013), p.5. Back
17
https://www.gov.uk/new-state-pension. Usually, a minimum of 10
qualifying years of National Insurance contributions will be required
in order to receive any money through the Single-tier Pension-between
this minimum and the full 35 years, a pro-rata sum will be paid.
Back
18
Pensions in an Independent Scotland, p.30. Back
19
Ibid. p.vii. The new Single-tier Pension will put an end to the
old system of 'derived rights', whereby an individual could build
up a state pension based on their spouse's or civil partner's
National Insurance contributions. However, the UK Government have
promised to put in place "transitional protection to cover
a variety of circumstances where the Government believes it is
right to recognise contributions made prior to the implementation
of the single-tier pension." The single-tier pension:
a simple foundation for saving, p.93. Back
20
Pensions in an Independent Scotland, p.vii. Back
21
Scotland's Future, p.141. Back
22
Pensions in an Independent Scotland, p.vi. Back
23
Scotland's Future, pp.141-2. Back
24
Scotland Analysis: Work and Pensions, p.10. Back
25
Ibid. p.65. Back
26
Jim Pickard and Sarah Neville, 'Lib Dems set to back 'triple lock'
for UK state pensions', http://www.ft.com/cms/s/0/4532b902-8aa3-11e3-9465-00144feab7de.html#axzz33mSqk7eo,
2 Feb 2014. Back
27
National Records of Scotland, "Life Expectancy for Administrative
Areas within Scotland 2010-2012, Including revised estimates for
2000-2002 to 2008-2010". For example, male life expectancy
at birth for 2010-12 varies by up to 7.5 years between Council
areas. Back
28
Pensions in an Independent Scotland, p.49. Back
29
Scotland Analysis: Welfare and Pensions, p.10. Back
30
Scotland Analysis: Welfare and Pensions, p.10. ONS population
projections and DWP calculations. Back
31
Pensions in an Independent Scotland, p.14. Back
32
Letter from Sir Andrew Dilnot, UK Statistics Authority, to Mr.
Alasdair Darling MP, 28 October 2013. See also UK Statistics Authority,
Monitoring Report: Official statistics in the Context of the Referendum
of Scottish Independence, 2013, pp.10-11. Back
33
Scotland's Future, p.140. Back
34
Q5493 Back
35
Q5489 Back
36
Qq5489-5492 Back
37
Oral evidence taken on 29 April 2014, HC (2013-14), Q5325 Back
38
http://scotfes.com/2014/03/06/the-ageing-population-problem/ Back
39
Scotland's Future, p.14. Back
40
Oral evidence taken on 9 April 2014, HC (2013-14), Q5276 Back
41
Scotland's Future, p.144. Back
42
Ibid. pp.145. Back
43
Scotland Analysis: Work and Pensions, p.65 Back
44
Steve Webb, letter to Scottish Affairs Committee, 30 May 2014,
pp.1-2,http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/scottish-affairs-committee/the-referendum-on-separation-for-scotland/written/10449.html Back
45
Scotland Analysis: Work and Pensions, p.67. Back
46
Scotland's Future, p.139. Back
47
Ibid. p.149. Back
48
Ibid., pp.149-150. Back
49
http://www.sppa.gov.uk/ Back
50
Scotland Analysis: Work and Pensions, p.71. On the £100
billion figure the paper notes, "Calculated on the basis
of liabilities associated with existing Scottish schemes where
these exist, and a population-based division of the liabilities
associated with UK-wide schemes. Much greater analysis would be
needed to understand the division of liabilities, following negotiations
over the treatment of public services and public service pensions
more widely, in the case of an independent Scottish state."
Back
51
Ibid. p.70 Back
52
Q5454 Back
53
Qq5513 and 5515 Back
54
https://www.gov.uk/government/news/new-timetable-clarifies-automatic-enrolment-starting-dates Back
55
Scotland's Future, p.146. Back
56
Pensions in an Independent Scotland, p.62. Back
57
Scotland's Future, p.147. Back
58
Q5484 Back
59
Q5484 Back
60
Pensions in an Independent Scotland, p.61. Back
61
Scotland's Future, pp.147-8. Back
62
Pensions in an Independent Scotland, p.65. Back
63
Ibid. Back
64
Ibid. p.66. Back
65
Q5450 Back
66
Directive 2003/41/EC on the activities and supervision of institutions
for occupational retirement provision, Official Journal of
the European Union, June 2003. Available at eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=oj:l:2003:235:0010:0021:en:pdf. Back
67
Q5529 Back
68
http://icas.org.uk/News/ScotlandsPensionsFutureNewsrelease/ Back
69
Scotland's Future, pp.148-9. Back
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