State of flux
Editorial: The announcement of a second Scottish independence referendum took many by surprise, including the British government – which has of course since poured fuel on the fire by announcing it will temporarily block it.
Brexit has changed the views of many, and may well have increased the odds of a Yes vote. But an exit from the UK would, as some have pointed out, not mean automatic entry into the EU. Add to that the fact the oil price has plummeted since 2014, and the outcome is again very uncertain.
Pension schemes could be affected as much as any sector were the nation to split, as our article explains.
One question for trustees and employers would be how they should deal with having scheme members spread across two states, one of which potentially in the EU, while the other will most likely be out.
Experts have noted that pensions regulation could after a while go separate ways, making a UK/Scottish scheme more onerous in terms of cost and administration.
In addition, EU rules currently demand that cross-border schemes are fully funded at all times where more than one EU member state is involved, and right now it seems less certain than ever whether Scotland or indeed the UK will still (or again) be EU members in years to come.
The final version of the new Institutions for Occupational Retirement Provision II directive looks like it has loosened the full funding requirement, leaving it up to member states’ regulators to make underfunded schemes implement recovery measures. But the big question is how each regulator will apply these new rules, according to Tim Smith and François Barker from law firm Eversheds Sutherland, who think that in practice nothing might change.
If Scotland’s first minister succeeds in taking the country out of the UK and into the EU before Brexit is complete, it would make life more difficult for sponsors and trustees overnight.
Sandra Wolf is editor at Pensions Expert. You can follow her on Twitter @SandraCWK and the team @pensions_expert.