Pension savings could be eroded if the “substantial” costs of unpicking the current UK regime are passed on to savers after independence, a professional body has warned.
A report on the potential impact of independence by the National Association of Pension Funds (NAPF) identified four key areas where it said the Scottish and UK governments must set out greater detail, including on regulations and cross-border schemes.
Ministers recently unveiled the Scottish Government’s pensions paper, which the NAPF welcomed in its report.
The association, which represents 1,300 pension schemes, highlighted the current regulatory system, saying there was a wealth of unanswered questions.
“Whatever the approach, unpicking the current regulatory structure, and the compensation structure in particular, would be extremely difficult and would require careful management over a long period of time,” it said.
“This is likely to lead to substantial costs for UK and Scottish institutions, as well as for sponsoring employers and schemes. Ultimately, these costs may have to be passed on to pension scheme members, eroding the value of their pension savings.”
A major challenge was said to be the future of cross-border schemes in the event of a Yes vote in the referendum next September.
Other professional bodies have already said these will have to be fully-funded or possibly closed down after independence.
A grace period would have to be negotiated during talks on Scotland’s place in the EU, to give more time to achieve full funding, the report suggested. “Clarity on these key planks of fiscal policy in an independent Scotland could help prevent mass disinvestment by strong long-term investors, such as pension funds, in the Scottish economy,” the report said.
A Scottish Government paper promised that pensioners would be given £160 a week from 2016 under independence, which would at least match any UK government provision, estimated to be £158.90 in the same year.
Ministers would keep the “triple-lock” to ensure the pension keeps pace with earnings and rising costs, at least for the first term of an independent parliament in Edinburgh.
Safeguards would be put in place for those people, mainly women, who are expecting to receive a state pension based on their spouse’s contributions, the Scottish Government said.
The NAPF said the commitment to a single-tier pension provided welcome clarity.
However, Labour’s shadow pensions minister, Gregg McClymont, claimed the NAPF report showed the pension schemes of workers in Scotland would be at risk under independence.
He said: “This is a devastating indictment of the SNP’s failure to provide credible and costed answers about the implications of separation on pensions in Scotland.”