Scottish independence would cost UK businesses a fortune and cause a flood of assets to head south. Consultants and providers south of the border would do very well out of a ‘Yes’ vote says Teresa Hunter
The pensions industry would face a massive headache should Scotland vote for independence in September.
A good chunk of the UK savings industry is based north of the Border, and independence will mean tearing up, restructuring or relocating thousands, possibly tens of thousands of pension schemes, not to mention trust deeds, the origins of some of which will be lost in the mists of time.
On the other hand, you could look on the bright side, and consider the potentially millions of pounds in fees it will generate for pension specialists, and the hours that will be spent trying to unravel more than a century of legal framework.
For consumers though, it could prove a tragedy as they are the ones who will have to foot the bill, as well as enduring a new element of chaos and confusion in what is already a comprehension-defying, bafflingly complex area of their lives.
Take company pensions. Here at least the burden of the workload will fall on the employer. Most big companies have employees north and south of the Border. Think about the supermarkets, retailers, pubs, hotels, restaurant chains and the financial services world.
In theory, these schemes will have to be split into one for Scottish employees and one for the rest of the UK. Deciding who goes into which one could become a nightmare, as well as putting a block on free movement between the two countries.
Scotland could have a different currency, tax rate, different interest rates, financial regulation and ombudsman system from the rest of the UK. Sorting out the payroll deductions alone will involve many man-hours.
Everything would have to be duplicated. A typical cost of mailing members of say £1,500, might climb to £2,000 or beyond. Then there would be the additional regulatory cost, currency exchange, possibly a Scottish office.
Will employers be happy to pay for all this? Well someone will have to pay, and in my experience, if the boss says he will cover a cost, he will look to recuperate that money from his staff elsewhere.
With personal and occupational money purchase schemes, individuals already meet the costs, unless an employer chips in. How much you pay will often come down to economies of scale.
With fewer than 2m currently working in the private sector in Scotland, how realistic is it to think Scottish charges could be competitive?
The Scottish Nationalists say there will be a Scottish equivalent of Nest. But would a Scottish Nest be able to match the charges of a UK nest?
A good guide to comparative charging can be round with the Scottish legal system, which is entirely separate from English law. Scots already pay more for conveyancing, surveys and even mortgages, because of the dominant and protected position of Scottish lawyers. Pity the poor Scots eh?
However, those living south of the Border will be more concerned with the security of their own pensions. Scotland is a big provider of financial services, managing £750 billion of pensions and investments for up to 10 million people. Its banks serve more than 40 million accountholders. But nine out of 10 customers of institutions based north of the border, live south of it.
It makes no sense whatever for these customers to keep their lifetime savings in another country, with potentially different interest rates, a more volatile currency and regulation over which they have no political control. Companies are wise to this and already drawing up plans to open new HQ’s south of the Border.
An independent Scotland may offer some advantages. It could slash taxes, and higher interest rates may be attractive to some investors. But as a new economy, it will be the equivalent of an emerging market, for the adventurous, not the home for our old age nest egg.
It is entirely their decision, but if Scottish voters opt for independence there will be a massive and inevitable repatriation of funds and jobs south of the Border.
Not everyone will think this regrettable, as there may be many winners down south.