The pensions industry has expressed concern about the issues surrounding tax on pensions as a result of Scottish devolution, despite the country voting ‘No’ to independence.

NAPF chief executive Joanne Segars said the ‘No’ vote brings to a close a period of intense speculation and debate, much of which has focused on the issue of pensions.

“But while the referendum may have passed, the changes and challenges facing pension funds are still very much here,” Segars warned.

“The Prime Minister today announced that Lord Smith of Kelvin will oversee the process to take forward devolution commitments with powers over tax, spending and welfare all to be agreed by November and draft legislation published in January. We will be keeping a close watch on this process as any changes may well have a material effect on pensions.”

PASA chair Margaret Snowdon agreed that despite a 55% ‘No’ vote, “we should not simply breathe a sigh of relief for pensions”.

“Further devolution of power to Scotland (and also to the rest of the UK) could introduce differences, such as different rates of income tax on pensions that would bring administration complications,” Snowdon said.

Furthermore, Towers Watson Edinburgh-based senior consultant Arthur Zegleman cautioned if the Scottish tax rate were anything other than 10p in the pound, income taxes would differ north and south of the border.

“Of course the Scottish parliament has yet to use the limited tax-varying powers that it has enjoyed for the past 15 years, but pension schemes will need to be ready for when this is no longer just a hypothetical challenge,” Zegleman said.

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