Lesley Riddoch: Assuaging fears of a rainy day

Uncertainty over pension payments seems to be one of the issues influencing the elderly. Picture: Stephen Mansfield

IS an unfounded worry about pensions encouraging some senior citizens to plan a No vote on 18 September? Last week’s Survation poll found Yes was in the lead amongst 25 to 54 year-olds but behind amongst younger and older voters. So far there’s been great emphasis on the newly enfranchised 16 and 17 year-olds – partly because their risk averse outlook can be cast as a “snub” to the SNP government and partly because their participation in a major ballot will make UK history. Yet that youthful cohort of 98,000 registered teenagers is smaller and less likely to turn out than the most Yes-resistant group of 145,000 “dignified elderly.” These are female pensioners (in the main), often emotionally torn between children living in England and Scots-based children who intend to vote Yes. All have had a lifetime’s experience inside the UK, and many have a profound belief that any kind of change will leave them financially worse off.

Plenty of column inches have been written about the youth vote – far less about these crucial elderly Scots. In the Survation poll released after last week’s Salmond v Darling TV debate, the 64+ group was the only one more likely to vote no as a result even though the vast majority agreed that Alex Salmond had won the debate.

Perhaps they thought Salmond won on the points raised – but that didn’t include pensions. It’s a vital question for older people since they have no other way to earn income. Since George Osborne announced “no deal” on sharing the pound in February, it may have seemed that the Westminster Government is playing hardball and all bets are off regarding cross-border financial obligations after a Yes vote. It’s a view fuelled by Gordon Brown’s repeated salvos about threats to pensions in an iScotland – a bit rich coming from the ex-chancellor responsible for a tax raid on pension funds.

Actually though there is good news. On this subject, there is near total agreement between current Holyrood and Westminster governments. Pensioners in an independent Scotland will be entitled to current levels of state pension. The commitment was made first in December’s White Paper when the SNP said the Scottish Government would assume full responsibility for pensions at the point of independence and would recognise all full and part contributions made to the UK. In May the UK pensions minister, Steve Webb acknowledged legal liability rests with Westminster so pensions are guaranteed by the UK too.

So both governments have given assurances that state and public sector pensions will be honoured in full if Scots vote for independence. End of.

That may come as a surprise to many Scottish pensioners – independence will have no impact on their entitlement to the state pension or public sector pensions – including civil service, armed forces, police, fire-fighters, NHS, universities, teachers and local government pensions. Some of these schemes are already administered by the Scottish Government from centres in Dundee and Motherwell, so the infrastructure for general pension pay-outs is already in place. Meanwhile companies like HSBC have privately confirmed there will be no impact on private pensions either.

After all, pensions are currently paid to Brits living in Spain.

The Scottish Government will follow the UK government’s move last year requiring all employees to contribute automatically to a pension when they start work (auto enrolment) – ironic that David Cameron has been forced to reverse Margaret Thatcher’s opt out policy which generated the current massive UK-wide problem of under investment in private pensions. The Scots will also establish a Pensions Protection Fund to guarantee pensions if private companies are unable to pay out. The only question mark surrounds “under-funded” plans. EU law says “Pension schemes that wish to accept contributions from an employer located in another EU Member State must be fully funded at all times.” Many UK schemes aren’t fully funded – people are living longer, some good investments haven’t yet been realised and some mistakes have been made. Most industry experts believe Scotland and the UK will copy Ireland and argue successfully for time to comply – so the details of transitional arrangements will be yet another subject for negotiation. Fortunately for Team Scotland, Edinburgh is heaving with just such actuarial expertise thanks to the city’s long involvement in financial services.

The White Paper suggests setting up an Independent Pensions Commission likely to investigate ways to boost Britain’s state pension – currently among the least generous in the developed world, with only Mexicans receiving less from their government on retirement according to the OECD. The UK Government’s decision to raise the pension age effectively created a cut in pension cash received by Scots since earlier mortality north of the border means fewer live to see the benefits of a lifetime’s pension contributions. A system that focussed on Scots could adjust that.

What about the demographic time-bomb though? If Scots are dying younger and losing young folk abroad as workers, wouldn’t an iScotland struggle to meet its pension commitments?

Firstly, Scots are not ageing much faster than anyone else. Secondly, an independent Scotland could act to reverse decades of stagnation where non oil-related investment has focused on London and the south-east. Thirdly, Scots could tackle the Catch 22 whereby younger workers can’t get a start because jobs are still occupied by older workers by lowering the retirement age. Fourthly, transformed childcare would release more women to become full time members of the workforce – raising tax contributions. Fifthly, a Scottish immigration policy would allow us to attract smart economic migrants – Sweden has admitted 100,000 such people this year in a country of just nine million. These and other measures could end the shameful situation where Scots youngsters are heading south just to find work.

Of course older voters are varied. Thousands of 70-somethings have been reactivated by the referendum campaign and their energy and experience will be invaluable setting up new systems in an independent Scottish state.

Other pensioners have Yes-leaning sons and daughters but have been hesitant to follow their example because of pension worries. Those fears have now been removed and Scotland’s pensioners are free to cast their vote the way they’d want to on 18 September public services free from austerity and cuts and the best life chances for their children and grandchildren.