Pensions Pieces: Scottish independence and what it might mean for pensions
On 18 September 2014, the Scottish independence referendum will take place. One of the key issues of a ‘yes’ vote will be the impact it has on the provision of pensions across the UK.
One key question from a pensions viewpoint is what form state pensions would take in an independent Scotland, given that state pension payments currently consume a large amount of government spending. In 2010–11, it amounted to £82bn, representing 40 per cent of social benefit payments and 13 per cent of all UK expenditure, so there is a question as to how state pensions will be paid for in such an event.
For its part, the Scottish government has stated that those persons who have already retired would see no change in their state pension entitlement as a result of independence. However, changes to the state pension have been proposed by the Scottish government in its white paper entitled ‘Scotland’s Future’. The changes include that from 6 April 2016 new pensioners will receive a Scottish single-tier pension, which the Scottish government states is similar to that proposed by the Westminster government, but with important improvements. Specifically, according to the white paper, within the first year of independence, this new Scottish single-tier pension will be set at a level of £160 per week (£8,320 per annum), which would be £1.10 a week higher than the rate received by pensioners in the rest of the UK. The Scottish government has also stated that in the ‘unlikely event’ of the UK rate for the single-tier pension being set at a higher level than in Scotland, the Scottish pension would be raised to match the higher figure. The pension would be paid in full to everyone who reaches state pension age after the introduction date and has 35 qualifying years of National Insurance contributions or National Insurance credits…
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