Implications for pensions of Scotland becoming independent

Policy on pensions is mainly reserved to the UK Parliament, with limited devolution of regulation-making powers for some public service schemes. This means that, in the event of Scotland becoming an independent country, decisions would need to be made as to how, and to what extent, it would be necessary to disentangle what is essentially a UK-wide system. A number of key points emerge:

• There would need to be a system for co-ordinating state pension rights built up in different countries. The existing EU system could provide a ready-made solution to this.

• The governments of an independent Scotland and the continuing UK would need to apportion responsibility for UK state pension rights built up before independence.

• Governments would also need to apportion responsibility for accrued rights within those public service schemes that currently operate on a GB or UK-wide basis – the schemes for the civil service and armed forces.

• Differences in tax and regulatory regimes could add complexity and cost for pension schemes operating across borders.

• Defined benefit pension schemes operating across borders within the EU could find themselves subject to more stringent funding requirements, although transitional arrangements could mitigate the impact of this.

This note discusses the implications for pensions in the continuing UK in the event of Scotland becoming an independent country. The future of pensions in an independent Scotland is considered in a briefing produced by the Scottish Parliament Information Centre (SPICe) – Pensions.