MIDDLE-aged people in Scotland could retire a year earlier under independence than they would by remaining in the Union, the SNP pledges today in a pre-referendum gambit that UK ministers say could
cost the fledgling country £6 billion.
At the start of a year in which Alex Salmond aims to win over Scottish voters to the advantages of independence, the SNP has said it will review plans to increase the state retirement age to 67 in 2026 if it is in charge of an independent nation.
At present the state retirement age for men and women is 65, but the UK government plans to increase it to 66 from 2018. Chancellor George Osborne recently announced he would bring forward a further increase to 67 from 2035 to 2026 in order to cut Britain’s yawning budget deficit.
A review by the Scottish Government could lead to the increase in 2026 being scrapped and put back until a later date. But the UK government last night warned the price of a delay in Scotland would be £200 million in the first year alone, rising to £6bn by 2035, as the country pays out pensions to retirees it would not have paid otherwise.
As thousands gathered in Edinburgh yesterday for the biggest ever rally in support of an independent Scotland, the SNP initiative on pensions drew new questions, with documents revealing the UK-wide pension scheme, The National Employers Savings Trust, has marked independence down as “high risk” to its pension holders.
The internal paper says that because of EU rules on cross-border schemes, employers in Scotland who wanted to invest sums for their staff in the scheme after independence would be barred from doing so.
This sets the stage for a week when pensions will be the next independence battleground, and it comes amid anxiety about how current public and private schemes that cover the whole of the UK would be affected.
Osborne’s scheme means that anybody under the age of 54 will now have to wait until they are 67 before they are entitled to a pension.
If Scotland were to delay the increase until 2035, it would only apply to people under the age of 45.
Deputy First Minister Nicola Sturgeon said “Scottish circumstances” mean that a cut in the pension age should be reviewed. She pointed to statistics which show that, in Scotland, men are on average likely to die 2.5 years before those in the UK, while women die 1.8 years earlier.
A paper on pensions to be published by the SNP government this week also suggests the pension age could be graded to reflect that people in lower economic groups are the most likely to die early. UK government policies, it notes, “fail to recognise that life expectancy can be more restricted for particular socio- economic groups”.
Sturgeon said: “We are concerned about Westminster’s accelerated timetable for increasing the state pension age to 67. This is now planned to be delivered eight years earlier than previously expected – with significant implications for individuals.
“We want to make sure that the pension age suits Scottish circumstances. Westminster changes fail to take into account the life expectancy differences between different socio-economic groups and between Scotland and the UK average. In the first year of an independent Scotland, we will establish an independent commission to consider the appropriate pace of further change to the retirement age beyond 66, taking account of Scottish circumstances.”
However, the proposal attracted questions over its potential cost last night, with Scotland facing a greater challenge than other parts of the UK over how it pays for its rapidly ageing population.
Estimates suggest that – under current plans – while the proportion of UK GDP being spent on pensioner benefits will rise from 7.1 per cent to 9.4 per cent over the next 50 years, it will rise in Scotland from 7.2 per cent to 10.6 per cent.
The SNP government-commissioned Fiscal Commission also recently concluded that Scotland will soon have more pensioners per head of working age people than the UK. It reported: “It is projected that without action, Scotland’s dependency ratio will increase more rapidly compared with the UK – reflecting the particularly sharp increase in Scotland’s pension age population.”
Last night, a spokeswoman for the Department for Work and Pensions said: “Spending on pensions, on benefits and on public services is all more affordable as part of the UK.”
Everyone benefits from the same UK-wide welfare and pensions system, which treats people equally regardless of where they live.”
She added: “Pensions spending per head is already higher in Scotland than in the rest of the UK, and in future, Scotland will have a higher proportion of elderly people. But by pooling our resources, we won’t need to rely on volatile and declining North Sea revenues to pay the pensions of Scotland’s elderly.”
This week’s paper on pensions is also expected to provide a response to warnings that cross-border pension schemes are facing a multi- billion-pound black hole under EU rules that would kick in if Scotland voted to become independent.
Those concerns will be added to by the NEST paper, which was released following a Freedom of Information request by the Better Together campaign.
Marking the risk of independence down as a “10” – or high risk – it adds that EU rules would cause major difficulties. “Membership of Europe – if Scotland retains membership of the EU or EEA [European Economic Area], then NEST members in Scotland will be considered ‘cross-border’. NEST will be unable, under the current order, to accept contributions in relation to their employment.”
Labour’s shadow pension minister Gregg McClymont said: “Leaving the United Kingdom would be costly and risky for pensions.
“Barely a day now goes by without the Nationalists making promises without any plan to pay for them, but this latest suggestion on state pensions would cost Scotland £6bn.”
“They also lack credibility on private pensions with the biggest new workplace scheme warning that independence is a high risk to pensions. This is a devastating double blow to Alex Salmond and should make anyone planning for retirement think twice about the risks of independence.”