A 20-page paper published by the institute sets out a number of issues, including public sector pension liabilities and European Union solvency requirements, that could affect Scotland if it becomes independent.
It argues that pension liabilities should be fully funded at the start of an independent Scotland, rather than through a gradual recovery plan, and that Scotland’s share of those liabilities in UK-wide pension schemes should be identified.
It also proposed a separate Scottish pension protection fund in the event of a ‘yes’ vote, and that pension schemes operating between Scotland and the rest of the UK should de defined as ‘cross-border’ under EU law.
Other questions posed by the report include which government will be responsible for state pension entitlements built up pre-independence in Scotland, and what the cost of cross-border defined benefit and hybrid schemes will be for employers.
David Wood, executive director of technical policy for the institute, said: “Both governments have a duty to engage with citizens and other pensions stakeholders to prepare a way forward, in advance of the referendum, and agree transitional arrangements to be implemented in case of a ‘yes’ vote.”
Adviser View
Graeme Mitchell, director of Scottish Borders-based Lowland Financial Planning, said: “The issue with final salary arrangements is that there’s safety in numbers, but if you split up the country, you put that under strain and schemes may not be able to meet the pension liabilities of workers.”
