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State Pensions

Can an independent Scotland afford the State Pension?

Yes. Scotland is in a strong position to afford a high quality pensions system. Scotland is already better able to afford the current levels of social protection spending (which includes pensions) than the UK as a whole, on the basis of government revenue and share of GDP:

  • expenditure on social protection as a share of GDP has been lower in Scotland than in the UK in each of the past five years – in 2011/12, social protection expenditure accounted for 14.4 per cent of GDP in Scotland and 15.9 per cent in the UK

  • a smaller percentage of Scotland’s tax revenues are spent on social protection compared to the UK. Figures from 2011/12 show that 38 per cent of Scottish tax revenues were spent on social protection, compared with 42 per cent for the UK

Source: Scotland's Future, Scottish Government, November 2013.

How would an independent Scotland manage State Pension responsibilities with an ageing population?

All western countries need to take account of ageing populations, which brings with it pension affordability issues. Addressing these issues in Scotland requires targeted action to improve growth, boost productivity, and in particular, to increase the working-age population as a share of overall population. An independent Scottish Government would be best placed to take such targeted action to meet Scotland’s specific circumstances.

Source: Scotland's Future, Scottish Government, November 2013.

What will happen to my existing State Pension in an independent Scotland?

Under our proposals, pensions will continue to be paid in full and on time, as now. The current Scottish Government intends that with independence, Scotland will keep the best of the existing State Pensions system, making genuine improvements where necessary. Our approach if in government under independence will be as follows:

  • the Basic State Pension will be increased each year by the ‘triple-lock’ – average earnings, inflation, or 2.5 per cent – whichever of these is the highest. This protection will stay in place for at least the first term of an independent Scottish Parliament. Westminster has only committed to keeping the triple-lock until 2015.

  • Guarantee Credit, which provides pensioners with a minimum income guarantee will also be increased by the triple-lock, initially for the first term of an independent parliament. This provides extra protection for low-income pensioners in Scotland, compared to the rest of the UK.

  • Savings Credit will be retained for existing pensioners on low incomes as in the UK.

Source: Scotland's Future, Scottish Government, November 2013.

I’ll be retiring after 2016. What will happen to my pension on independence?

All accrued pension rights will be protected when Scotland becomes independent. People reaching State Pension Age from 6 April 2016 will move to a new single-tier pension. This is being introduced across the UK countries. In addition, this Scottish Government proposes that in Scotland pensioners should benefit under independence from additional protection as follows:

  • the single-tier pension will be set at £160 per week. If the rate for the single-tier pension is higher in the rest of the UK at that point, the Scottish single-tier pension will match this figure

  • for the whole of the first term of an independent Scottish Parliament, the single-tier pension will be increased each year by the ‘triple-lock’ – that is the highest of average earnings, inflation, or 2.5 per cent. This guarantee is only in place in the rest of the UK until 2015. Guarantee Credit, which provides a minimum level of pension income, will also be increased by the triple-lock

  • in addition, Scottish single-tier pensioners on low incomes will still be able to benefit from Savings Credit, which is being abolished for new pensioners from 2016 in the rest of the UK

  • provision will also be maintained for those expecting to receive a State Pension based on their spouse’s contributions. This protection would be in place for 15 years after the introduction of the single-tier pension, unlike in the rest of the UK

Source: Scotland's Future, Scottish Government, November 2013.

Will pension rights already accrued be protected in an independent Scotland?

Yes. Accrued pension rights will be protected in an independent Scotland. Our plans are as follows:

  • for those people living and working in Scotland at the time of independence, the UK pension entitlement they have accrued prior to independence will become their Scottish State Pension entitlement

  • any pension entitlement accrued in Scotland after independence will also form part of that Scottish State Pension

  • on retirement, the Scottish State Pension will be paid by the Scottish Government

Source: Scotland's Future, Scottish Government, November 2013.

I’ve worked most of my life in England and have only moved to Scotland recently to retire. Does that affect who will pay my pension and how much I will get?

No, it will not affect how much you will get. If you are in receipt of a UK State Pension on independence and you are resident in Scotland, the responsibility for paying that pension and all associated payments will transfer to the Scottish Government.

Source: Scotland's Future, Scottish Government, November 2013.

I’ve accrued some State Pension in England, and some overseas, but none in Scotland. I’m now living in Scotland. How will my State Pension entitlement be calculated and who will pay it?

It will not matter where in the UK you accrued your State Pension entitlement: if you are retired and are living in Scotland on independence, the Scottish Government will be responsible for paying that pension. The amount you are entitled to will not change because of independence.

In terms of State Pension accrued outside the UK, the Westminster Government is currently not responsible for these payments. The same will be true of the Scottish Government on independence. People living in Scotland will, as is the case now, have their international pensions paid either by the country concerned or by the International Pensions Centre.

Source: Scotland's Future, Scottish Government, November 2013.

I live in Scotland but I work between Edinburgh and London for different employers. What will happen to the various State Pension pots I have accrued after independence?

All State Pension accrued up to the point of independence anywhere within the UK will count as your State Pension entitlement.

After independence, any pension entitlement gained by working in Scotland will accrue to your Scottish State Pension. Any pension entitlement from working in England, Wales or Northern Ireland will accrue to the UK State Pension and will be payable by the Westminster Government.

Source: Scotland's Future, Scottish Government, November 2013.

Will it be difficult to transfer pensions to an independent Scotland?

The Scottish Government will work with the Westminster Government to ensure an orderly transition of responsibility for pensions to an independent Scotland.

Source: Scotland's Future, Scottish Government, November 2013.

How will responsibility for pensions transfer to an independent Scotland?

The Scottish Government supports the view of the Expert Working Group on Welfare that a ‘shared services agreement’ for the administration of benefit payments during a transition period will be in the best interests of both the UK and Scotland.

Both during a period of transition, and in the longer term, pension payments will be administered by existing offices in Dundee and Motherwell.

Source: Scotland's Future, Scottish Government, November 2013.

State Pension Age

What will happen to the State Pension Age in an independent Scotland?

Under current Westminster Government plans, the State Pension Age is increasing to 67 for people aged between 44 and 53, over a two year period between 2026 and 2028. The Scottish Government is not persuaded that this increase is right for Scotland.

On average, Scots currently enjoy fewer years in retirement – and in receipt of State Pensions – than the UK average due to lower life expectancy. Life expectancy for both men and women in Scotland has consistently remained below the UK level, despite significant improvements over many years. In 2013, life expectancy at age 65 was 1.2 years higher in the UK than in Scotland for women; and 1.3 years higher for men.

This Scottish Government therefore reserves judgment on the Westminster Government’s timetable for the State Pension Age increase to 67. Independence is the only way to ensure that the future State Pension Age in Scotland is determined according to specific Scottish circumstances.

Source: Scotland's Future, Scottish Government, November 2013.

How will the decision on the State Pension Age for Scotland be taken?

We intend if in government, to appoint an Independent Commission on the State Pension Age within the first year of independence. The Commission will have a remit to investigate and make recommendations on the appropriate rate of increase of the State Pension Age, beyond 66, that would suit Scottish circumstances. The Commission will take into account life expectancy, fairness and affordability, including implications for increased public sector pension costs.

We envisage the Commission reporting to Parliament within the first two years of independence with a view to decisions being taken promptly thereafter. Prompt implementation will allow sufficient time for longer term financial planning.

Source: Scotland's Future, Scottish Government, November 2013.

Private Pensions

Will my private pension benefits be protected?

Yes. Your occupational or personal pension sets out your retirement benefits. The payment of the benefits you have built up in your existing pension will not be affected by the move to independence.

Source: Scotland's Future, Scottish Government, November 2013.

What will the Scottish Government do to help people save for retirement?

We propose following independence to:

  • continue with the roll-out of automatic enrolment into a workplace pension

  • establish a Scottish Employment Savings Trust for people with low to middle earnings

  • launch a Financial Capability Strategy to help build people’s skills, knowledge and understanding about personal finance

  • work with the pensions industry in Scotland on the design of new pension products that will provide greater certainty to savers about the final value of their pensions

  • improve pension information, giving people personalised feedback on saving for their retirement

  • consider whether adjustments to tax relief arrangements would further incentivise saving

Source: Scotland's Future, Scottish Government, November 2013.

Will the Scottish Government improve information and advice on private pensions?

Yes. At present, information and advice on financial services and pensions is provided by a range of organisations, with the result that people are often confused about where they should look for advice. This Scottish Government is proposing a new model to improve the standard of advice for consumers by providing information and advice you can access in your local area.

Source: Scotland's Future, Scottish Government, November 2013.

Will automatic enrolment of employees into a workplace pension continue?

Yes. Automatic enrolment into workplace pension schemes helps people to save for their retirement and the Scottish Government intends that this will continue.

Source: Scotland's Future, Scottish Government, November 2013.

Will employees and employers continue to have access to the National Employment Savings Trust?

The Scottish Government will work with the Westminster Government to ensure that the benefits people have built up in the National Employment Savings Trust (NEST) are accessible. This Government proposes that a Scottish equivalent of NEST should be established to help firms in Scotland enrol their employees.

Source: Scotland's Future, Scottish Government, November 2013.

Will tax relief on private pensions and salary sacrifice continue in an independent Scotland?

Yes. The current arrangements will continue at the point of independence. Scotland will inherit the tax system and the prevailing UK rates and thresholds for all taxes including tax reliefs. Decisions on specific taxes – including tax rates, allowances and credits – will be made by the Parliament and Government of an independent Scotland.

Source: Scotland's Future, Scottish Government, November 2013.

Will people with pensions in the rest of the UK be affected by exchange rate fluctuations if Scotland had a different currency?

No. With the pound Sterling as currency of an independent Scotland, pensions will be paid in pounds Sterling, as they are today.

Source: Scotland's Future, Scottish Government, November 2013.

Will there be a Scottish Pensions Regulator?

Yes. This Scottish Government proposes to establish a dedicated Scottish Pensions Regulator, to ensure the same level of protection for people’s pension savings as is currently provided, and to promote an effective pensions market.

Source: Scotland's Future, Scottish Government, November 2013.

Will private pensions be protected in an independent Scotland?

Yes. We believe it is in the best interests of all parties for the current arrangements to continue – although we are also prepared to make specific arrangements for Scotland – to ensure that people will have the same level of protection as is currently provided by the UK Pension Protection Fund, the Financial Assistance Scheme and the Fraud Compensation Fund.

We will also ensure that arrangements for an effective compensation scheme are established, mirroring the level of protection provided in the UK Financial Services Compensation Scheme.

Source: Scotland's Future, Scottish Government, November 2013.

Will consumers in Scotland have access to a pensions ombudsman?

Yes. Two delivery models are being considered by the current Scottish Government. Either, a single Scottish Ombudsman Service – a one stop shop for consumers (including in relation to pensions) – will be established, or a specific Scottish Financial Services Ombudsman, with responsibility for handling complaints about pensions and financial services, will be established.

Source: Scotland's Future, Scottish Government, November 2013.

How will deficits in defined benefit private pension schemes be addressed in an independent Scotland?

Current deficits in defined benefit pension schemes have been caused by the financial management of these schemes within the UK. Many schemes are working to become fully funded and have recovery plans in place. These will continue after independence.

Our proposals for independence will deliver strong protection for people’s private pension savings and establish an effective regulator system which will set the parameters for such schemes to achieve a stable funding position.

Source: Scotland's Future, Scottish Government, November 2013.

What will happen to existing UK-wide pension schemes?

Specific requirements apply under EU law to pension schemes that operate across different member states. However, the cross-border rules allow member states a degree of flexibility. Transitional arrangements were put in place by the Westminster Government and Ireland when these rules were introduced and we consider that it will be possible to agree transitional arrangements for existing UK-wide schemes. The Scottish Government is keen to start discussions with the Westminster Government and the European Commission as soon as possible, with a view to reaching agreement in the interests of employers and pension schemes across the UK.

Source: Scotland's Future, Scottish Government, November 2013.

Public Sector Pensions

Could an independent Scotland afford public sector pensions?

Yes. Scotland’s stewardship of public sector pensions can in some areas already be argued to have delivered more sustainable schemes than their counterparts in England and Wales.

Source: Scotland's Future, Scottish Government, November 2013.

What will independence mean for the existing rights of members of affected public sector pension schemes?

In an independent Scotland, all public service pension rights and entitlements which have been accrued will continue to be fully protected and accessible – whether they have been accrued in schemes already executively devolved to Scotland or those currently reserved to Westminster. Article 1 of Protocol 1 of the European Convention of Human Rights means that pension rights are property rights under the Convention, which governments must respect.

There will be no difference to individual contribution rates or benefit levels as a result of independence.

On independence, the legislation and rules governing public sector pension schemes, whether reserved or already executively devolved to Scotland, will continue to apply (under the “continuity of law principle”). The arrangements for these public sector pension schemes will therefore continue to operate as at present, bridging the period before and after the date of Scotland’s independence.

Source: Scotland's Future, Scottish Government, November 2013.

Could an independent Scotland manage public sector pensions effectively?

Scotland already has the people and the infrastructure in place for delivering high quality public sector pensions. In particular, the Scottish Public Pensions Agency (SPPA) has been responsible for administering Scotland’s NHS and teachers’ pensions for over twenty years and the Scottish Government has recently confirmed that the Agency is to administer all police and fire-fighter pensions in Scotland from April 2015.

Alongside this delivery expertise, the SPPA is also responsible for developing policy for all of the main public sector pension schemes executively devolved to Scotland.

The SPPA’s mixture of multi-scheme policy and delivery responsibilities is unique in the public service pensions landscape and is a significant asset. No other body in the UK has such first-hand knowledge and experience of both designing and delivering public service pensions policy. This includes the development of policy for, and the management of, two major sets of reforms of public service pensions in the last ten years.

Source: Scotland's Future, Scottish Government, November 2013.

What will independence mean for how pensions will be managed?

For scheme members and existing pensioners of Scotland’s schemes, there will be no change in pension arrangements following independence. If, for example, a former NHS Scotland employee has retired, begun to draw her pension, and moves to live in England, the Scottish NHS pension scheme will continue to pay that pension, as it does at present.

For pension schemes that are currently reserved, such as civil service, armed forces and judicial pensions, the Scottish Government will work with Westminster to ensure an orderly transition of pension responsibilities to an independent Scotland.

The Scottish Public Pensions Agency will form the basis for delivering the additional responsibilities for public sector pensions that will be required in an independent Scotland. During the transitional period, pensions will continue to be paid in full and on time and pensioners will continue to benefit from safeguards, including the governance provisions of the Public Service Pensions Act 2013 and the provisions of Article 1 of Protocol 1 of the European Convention on Human Rights, which means that pension rights are property rights under the Convention which governments must respect.

For current UK-wide public service pension schemes, the Scottish Government will take its fair share of liabilities based on meeting the pensions responsibilities of pensioners who live in Scotland.

On independence, these pension schemes will continue to operate as at present. Just as today, however, it would be open to future governments to suggest changes. Independence simply means that these future decisions will be taken in Scotland rather than by Westminster.

Source: Scotland's Future, Scottish Government, November 2013.