The Scottish government must start considering the impact of independence on pensions before results of the referendum to be held in September next year, ICAS has said.

The chartered accountants group’s new report on the impact of independence warns that there are significant unanswered questions around the state and public sector pensions, but also for private schemes. Occupational schemes operating UK-wide face cross-border issues as a result of independence and under EU law would be required to maintain full funding of liabilities, immediately rectifying deficits, and conducting annual, rather than triennial, actuarial evaluations.

“Dealing with underfunding would have major cost and cash flow implications for employers with underfunded cross-border schemes,” the report, Scotland’s Pensions Future: What Pensions Arrangements Would Scotland Need, notes.

Added complexity would result if Scotland was – even temporarily – to exit the EU as a result of independence, it adds.

At least initially, ICAS says, the Scottish government should to adopt existing UK arrangements for pension regulation and protection in the early days of independence. However, it says these would develop over time. It also argues the Scottish government should develop “a robust plan for Scotland’s pensions future” in the lead up to the referendum and agree transitional arrangements to be implemented in case of a ‘Yes’ vote.

Director of technical policy David Wood said: “For schemes in the private sector, which became cross-border schemes in the event of independence, addressing any underfunding would be a priority for both Scottish and rest of the UK employers.

“ICAS calls on the Scottish and UK governments to engage with business, the pensions industry and the EU to minimise the financial impact on these schemes, their sponsoring employers and the people who have paid into the schemes.”

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