Report hints at pensions uncertainty

A N INDEPENDENT Scotland could delay increases in the retirement age thanks to lower pension costs north of the border, a new paper has concluded.

But academics from Stirling University said such a policy could still be “costly to fund”.

The paper, by Professor David Bell, Dr David Comerford and David Eiser, also warned the Scottish Gover nment's “triple lock” guarantee for pensions in an independent Scotland would “eventually be unaffordable”.

The report was published as part of a special issue of the National Institute Economic Review, focusing on the economics of independence.

The Scottish Government has already pledged to continue paying the basic state pension at the current rate if there is a Yes vote in September’s referendum.

Ministers would keep the “triple-lock” guarantee for pensions to ensure the pension keeps pace with earnings and rising costs, at least for the first term of an independent parliament in Edinburgh, with pensions promised to increase by at least 2.5% a year.

A n expert commission would be established to consider the appropriate age threshold for pensions — with Deputy First Minister Nicola Sturgeon having already suggested this could see people in Scotland picking up their state pension earlier than those in the rest of the UK.

The report, from Professor Bell, Dr Comerford and Mr Eiser, said that the importance of economic issues to the referendum debate “suggests that the political economy of pensions will play a key role in determining the attitudes of taxpayers and pensioners to the referendum”.

It said spending on the state pension in Scotland in 2011-12 had amounted £6.3 billion — almost 10% of the total of public sector expenditure in Scotland.

The experts stated: “Our analysis has shown that the costs of the state pension would be lower in Scotland, due to Scotland’s lower life expectancy.

“This could, in theory, be used to reduce contributions or to delay increases in the state retirement age in Scotland, relative to the rest of the UK.”

But the report went on to warn: “If there are many pensioners and few workers then such a policy could still be costly to fund.”