The UK’s financial services industry has overwhelmingly welcomed the ‘No’ vote returned by the people of Scotland in yesterday’s (18 September) referendum on independence, but warn that changes will be coming regardless of the result.
One of several Edinburgh-based institutions which declared contingency plans to move south of the border, Standard Life stated that it fully respected the decision of the Scottish people.
“We recognise that further constitutional change is very likely following the clear result of the referendum. We will consider the implications of any changes for our customers and other stakeholders in our business to ensure their interests are represented and protected.
“As a large company based in Scotland, Standard Life is ready to contribute to this process.”
Peter Wallace, head of financial services at Ernst and Young Scotland, concluded that while things like currency and regulation can be scored off the list of considerations, the impact of any further legislative changes, particularly those around taxation, will move up the agenda.
“Change is coming to Scotland regardless of today’s result in the shape of the Scotland Act and the timetable of additional powers proposed by the Better Together campaign. The future of the sector was at the forefront of the independence debate, a position we hope it maintains as discussion on further devolution progress.”
Tom McPhail, Hargreaves Lansdown’s head of pensions research, added that he expected “bold and eye-catching policy announcements around tax and social justice” which may mean investors who have the means to take advantage of tax breaks on pensions should make the most of them while they can.
He also suggested that devolution of powers from Westminster to Scotland could lead to regional tax powers, impacting on pensions and other savings plans. The boost to the UK economy of retaining the status quo may mean earlier expectations of interest rate rises, according to Mr McPhail.
“Investors who decide they want to buy an annuity should make sure they shop around for the best possible terms, as it can boost their retirement income by 20 per cent. Anyone who prefers to defer buying an annuity, whether for a few months or for the long term, can use a low cost drawdown plan to access their retirement savings.”
Ronnie Ludwig, partner at chartered accountants Saffery Champness, noted that the devolution process means a great deal of change in the Scottish tax system, with a Scottish rate of income tax expected in April 2016.
“We are going to have to define who is a Scottish taxpayer and who is not. So many of the people that I deal with have lives and businesses which span Hadrian’s Wall, and this will certainly not be straightforward.
“A number of important tax reliefs take the income tax rate as their baseline, such as pensions relief and gift aid. There will be plenty of unravelling to be done.”
Mr Ludwig warned that if Scotland’s income tax rate ends up differing considerably from the rest of the UK, people may move or rearrange their business affairs. “We may also see deliberate tax competition with the rest of the UK.”
Simon Morris, partner at law firm CMS, also raised a concern around Scottish firms launching new funds and product lines that “may choose to do this out of England in future to avoid uncertainty around where Devo Max might lead.”
