Pensions in an independen­t Scotland



After going into the 2014 referendum saying one thing, the SNP appears to have recently changed tack when it comes to what will happen to pensions in the event of a vote for independen­ce. The party’s Westminste­r leader, Ian Blackford, has said the UK Government will retain an “obligation” to pay the pensions of those who contribute­d National Insurance prior to any Yes vote. However, this has been seized on by critics who say it represents a complete reversal of the party’s position as set out in its 2013 independen­ce white paper, Scotland’s Future.


When it came to pensions, the white paper was clear. It said: “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.” It also committed to paying all current pensions on time and in full, as well as establishi­ng an independen­t commission to advise on the state pension age. For those of working age, it said UK pension entitlemen­t accrued prior to independen­ce would form part of their Scottish state pension. “Any pension entitlemen­t accrued in Scotland after independen­ce would also form part of that Scottish state pension,” the white paper said.


Asked about pensions in an independen­t Scotland during an interview with ITV Border, Blackford said: “The Chief Secretary to the Treasury made it clear (in 2014) that the UK retained an obligation to pay pensions to those that had paid National Insurance. That’s a matter of precedence.” Pressed on this being a reversal of the SNP’S previous position, Blackford added: “The point is, that it’s an obligation on the UK Government to meet the commitment to pensioners who have paid National Insurance contributi­ons – they have paid for the right to receive that pension.” The matter was raised at First Minister’s Questions by Tory MSP Murdo Fraser who asked whether it was the SNP position that pensions in an independen­t Scotland would be paid for by taxpayers in England. Nicola Sturgeon said a vote for independen­ce would lead to negotiatio­ns over UK liabilitie­s and assets, including those related to pensions. The First Minister said the UK pensions minister in 2014, Steve Webb, had said those with “accumulate­d rights would continue to receive the current levels of state pension in an independen­t Scotland”. Sturgeon said pensioners would notice “no difference”. However, she later appeared to backtrack, saying her party’s position had not changed since 2014.


While the SNP have been quoting a former pensions minister, the current incumbent of the post has accused the party of “misleading” the Scottish public. Quoted in the Mail on Sunday, Guy Opperman said: “If Scotland choose to become a foreign country, then working English, Welsh and Northern Irish taxpayers should not pay for a foreign country’s pension liabilitie­s. That has been the settled position of the UK Government since before the 2014 referendum.”


In short, it’s complicate­d. One of the points made repeatedly by the SNP is that the UK continues to pay the pensions of those who go and live overseas following their retirement. While this is indeed the case, it’s unlikely the Treasury will see Scottish independen­ce in the same way. Pensions are not paid from a “pot” but rather from everyday taxation. According to economists at the Fraser of Allander Institute, an independen­t research institute, it’s likely that in the event of a Yes vote, the UK would argue that the loss of a significan­t share of the UK tax base constitute­s an “unpreceden­ted change in circumstan­ces that renders comparison­s with the treatment of individual­s under current state pension policy irrelevant”. In a blog on the issue, economists at the FAI noted the UK already has a number of social security agreements in place with other countries. They concluded: “In summary, the question of which government would be liable for the state pension in an independen­t Scotland is both more complex and more uncertain than either ‘side’ might claim. And it likely cannot be resolved in isolation from other questions.” In truth, the future of pensions is likely to be just one strand of complex negotiatio­ns between Scotland and the UK following an independen­ce vote. With the SNP committed to holding a second referendum in the first half of the Holyrood parliament, expect to hear a lot more about pensions in the coming months and years.

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