Jeff Salway: Politicians can’t be trusted with pensions

SOMEWHERE in SNP HQ, one can imagine, is a dark, windowless room housing the brains trust tasked with setting out a coherent vision of an independent Scotland.

On the wall is a clock ticking down both to the referendum next September and, more urgently, to the blueprint that’s been promised for the coming autumn.

To one side is a thick document no-one wants to look at, detailing the complex and prickly pensions questions that must be answered. But pensions is now entering centre ground in the debate. The Institute for Fiscal Studies (IFS) confirmed last week what we already know – that an independent Scotland would need to find some way of supporting a welfare bill driven up by a population ageing more rapidly than that of the UK as a whole.

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The IFS report was seized on by both camps; the No campaign claimed it proved Scotland couldn’t afford to go it alone. The Yes campaign pointed out that independence would grant Scotland an opportunity to embark on the reforms needed to build a welfare system more robust than that being dismantled by the coalition government.

The latter point is one worth considering, and I say that as someone sitting firmly on the fence in the referendum debate. It involves making brave decisions, and not the ones David Cameron claims to be making when the consequences are invariably borne by the poorest and most vulnerable in society.

The problem – one that Scotland would do well to recognise regardless of next year’s outcome – is that those decisions are in the hands of the wrong people. Because politicians are largely clueless when it comes to pensions.

Trust in pensions is at crisis point, the constant tinkering of the past 20 years undermining confidence in the system. Party politics encourages a chronically short-term mindset utterly at odds with the perspective needed in developing a sustainable pensions system.

It’s a painful lesson being digested in Detroit, a city whose bankruptcy is being blamed in no small part on state and local government mismanagement of pensions.

There is an alternative and while the Yes campaign must set out a strong and plausible explanation as to how Scotland will meet its short- and long-term obligations, it would also do well to propose a shift of control.

Scotland has an enormous wealth of pensions knowledge expertise that should be tasked – regardless of the vote outcome – with helping plot the way forward. That means mapping out everything from financial education in schools and incentivising savings to sensible reform of public sector pensions and managing long-term liabilities.

Then there’s the matter of the pensions regulation, a Scottish pension protection fund, the funding of cross-border occupational schemes, the taxation of pensions ... the list of issues that requires to be tackled is long and daunting.

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It would best be achieved if politics were taken out of it, with responsibility for pensions passed to an independent body. Because if there’s one lesson we’ve learnt from the UK government’s handling of pensions in recent times, it’s that it should never be left to politicians.