Triple lock system for Scottish pensions - Swinney

Pensions in Scotland would be protected under a triple lock system in the event of independence, according to Scottish Cabinet secretary for finance John Swinney.

Speaking at the 2013 Institute of Chartered Accountants of Scotland (ICAS) Pensions Conference in Glasgow yesterday, Swinney outlined that the new single-tier flat rate state pension will be uprated by whatever is higher – earnings growth, inflation or 2.5 per cent.

Swinney said this was in contrast to the current UK governmental system, where the triple lock for the basic state pension is guaranteed until 2015.

“There is no guarantee that this will apply to the new single-tier state pension being applied in 2016 in the UK,” Swinney argued.

The basic state pension in the UK is based on a rise by earnings basis only.

Swinney warned that the regulatory structure in an independent Scotland must have “a compatibility with the rest of the regulatory infrastructure in the UK”, given that Scotland may have the same currency.

Labour shadow pensions minister Gregg McClymont also spoke at the event, and outlined a range of issues that could prove to be problematic in the event of independence.

“Unwinding Scotland from a UK pensions system that has been built up through generations and involves lifetime accruals is a significant and difficult process and this is where we need to get down to the detail,” he said.

McClymont added that Scotland would be exposed to increased risks, costs and complexity if it were to leave the UK. The “regulatory architecture” would also be problematic, he said.

“At the moment Scottish savers and pensioners benefit from the Financial Services Compensation Sheme, the Financial Conduct Authority, the Pensions Regulator, auto-enrolment, Nest and the PPF. The risks, costs and complexities from unwinding from this system are surely rather significant.”

The issue of the EU and DB final salary cross border schemes was also addressed, with questions arising around the costs and complexities of cross border schemes emerging and proliferating in Scotland if it becomes a cross border country.

Scottish Conservatives’ finance spokesperson Gavin Brown highlighted the complexities of independence on a demographic basis and the effects it will have with regards to the state pension.

“The number of Scottish pensions will increase by 80 per cent between 2010 and 2060 with most of that increase concentrated between now and 2035. The proportion of Scotland’s population which is of pensionable age is projected to increase by 2.9 per cent out to 2035 compared to 1.7 per cent for the rest of the UK. That is quite a significant difference over a 20 or 30 year period,” Brown said.

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