Industry to meet ministers over impact of UK split

The Scottish government has proposed independence will take 18 months to implement following the referendum, which is scheduled for September next year. But the process of disentangling the country’s pensions from the rest of the UK has stalled as each government grapples with their level and nature of involvement in negotiations.

The National Association of Pension Funds organised a political debate on the issue in March which included shadow pensions minister Gregg McClymont, and will be having further discussions with ministers during the summer recess, according to Steven Dignall, public affairs spokesperson for its Scottish division.

“We must first work out our policy line on this to try to remain as politically neutral as possible – but as such this is a political debate, the parties on both sides just want to win this,” he said.

Owen Kelly, chief executive at Scottish Financial Enterprise, an industry body for the country’s financial services sector, said the 18-month timetable to complete all negotiations for a new pensions system was “optimistic”.

“They’re talking about a pretty compressed timetable for negotiating a very wide range of issues,” warned Kelly, “all the way from pensions to currency, central banking, borders, the whole lot.”

He added: “The UK government has made it very clear that they can’t before the referendum enter into some sort of process of negotiation. I’m not even sure the Scottish government can either because they don’t have, as I understand it, the authority from the electorate to conclude any agreement.”

How a split could hit your scheme

The NAPF also fed into a report by the Institute of Chartered Accountants of Scotland, published in April, which sought to explore the key areas that would be affected by a yes vote. This identified several potential issues, which included EU solvency requirements for cross-border arrangements.

The report stated: “Schemes which operate in more than one country must fund their liabilities in full and any underfunding must be rectified immediately rather than through a staged recovery plan.”

Pension professionals are not unanimously concerned about the impact of Scottish independence.

Robert Burgon, secretary and pensions manager at the Plumbing and Mechanical Services Industry Pension Scheme, said the report raised “some interesting and challenging questions”, but added: “As the manager of a UK-wide occupational pension scheme with members in all four countries, I would like to think that it will be business as usual for us, regardless of the outcome of the vote.”

However, Alasdair Buchanan, head of group communications at Scottish Life, said there would need to be negotiations on how scheme assets were split and consideration of how this would affect future funding levels.

“Any actuarial valuations of a scheme are not based on employees who live in one country and work in a different country. It would need entirely new valuations to be carried out to identify what the relevant assets and liabilities were,” he explained.

Buchanan added that the key to finding workable solutions that are not quashed as a result of the partisan nature of the independence debate is through the involvement of “experts” such as ICAS.

“They have a very strong responsibility on a professional standing to try to ensure the debate is properly informed, and as far as possible we need to avoid the arguments degenerating into a ‘ya-boo’ type political debate, which is sadly all too often what we seem to get in parliament,” he said.

It has been accepted by most parties that Scotland in the event of a yes vote would have to set up its own regulator, said Steven Cameron, head of regulatory strategy at pension provider Aegon.

But he added that the exact function it would perform is less clear, and pointed to the various regulatory bodies and departments that currently oversee different aspects of UK pensions, including the Pensions Regulator, the Department for Work and Pensions, and the Financial Conduct Authority.

“[The] implications would need to be looked at through each of these lenses,” he said.