A ‘Yes’ vote in the independence referendum could prompt Scottish firms to move to England and be “cataclysmic” for pensions, it has been claimed.
Amid all the talk about the UK’s debt and whether an independent Scotland could use the pound, the fund world has been preparing itself for just such a result.
One major Scottish fund group, which did not want to be named, said retail clients had shown most concern but that its institutional customers had also expressed “a lot of interest” in the debate and had “lots of questions regarding the regulatory structure which would be in place”.
A senior partner at the firm said: “That will be hammered out after the referendum. There is the possibility an international fund manager domiciled in Scotland could be regulated by the FCA, or Scotland could mirror the UK regulator.
“Our view is as a small country, Scotland would need to do anything it could to be competitive. The idea the financial sector would be put to the sword doesn’t make sense.”
He added: “Scotland would not want to slaughter the golden goose.”
While the group said it had no plans to move its headquarters, whatever the outcome, Edinburgh-based Standard Life said it had made preparations.
It said: “In view of the uncertainty about Scotland’s constitutional future, we have put in place precautionary measures which would help enable us to provide customers with continuity. This includes planning for new, regulated companies in England to which we could transfer parts of our business if there was a need to do so.”
It said the transfer of its business “could potentially include pensions, investments and other long-term savings held by UK customers”.
This move would be to ensure all transactions with customers outside Scotland continue to be in sterling and all customers outside Scotland remain part of the UK tax regime. It would also maintain access to regulatory coverage by the FCA and Financial Services Compensation Scheme.
“We will continue to serve our customers in Scotland and will consider what additional measures we may need to take on their behalf as a consequence of constitutional change once further clarity and certainty is received,” Standard Life added.
Though some have argued that the impact on investors would be insignificant, John Fox, director of the pension provider Liberty SIPP, said Scottish separation could be “cataclysmic for the pensions industry – and people’s nest eggs could be the casualties”.
He said: “The real risk is for pension savings held in Scottish assets. With an independent Scotland barred from using sterling, they would need to be redenominated into the new Scottish currency – and this would inevitably also reduce their value.
“The EU does not allow unfunded cross-border pensions, so this could create extra problems for people living south of the border whose pensions are held by a Scottish provider. It’s still unclear whether an independent Scotland would be able to join the EU, so for now all bets are off on this question.”
Mr Fox said the financial services industry was “at the mercy of the democratic process” and that this was “already causing sleepless nights for many of the sector’s biggest players”.
He added: “If Scotland wakes up to independence next week, it’ll be accompanied by parties on the streets of Edinburgh and panic on the streets of the City.”
