The Scottish independence referendum has opened up a new seam of complexity for pensions warns Teresa Hunter, former money editor of Scotland on Sunday
So now the Independence Vote is out of the way it’s time for a big group hug, and anyone who grouches for even a nanosecond about all the pointless work this has involved, doesn’t get to come to the office healing party.
Not that you’ll have much time for getting in touch with your feminine side in the months ahead. The Independence vote has opened up as many new unknowns as it has resolved, and if there is one thing financial services hate …altogether now… it’s uncertainty.
Yes I know the markets rallied in its immediate aftermath, which was certainly an improvement on the Armageddon predicted for the alternative outcome.
But that was largely fuelled by stale whisky still pumping through brains deadened by the taking of a few wee drams the night before.
More telling, I thought, were the very few institutions, with the exception of Royal Bank of Scotland, who rushed out statements saying “panic over …business as usual from hereon in.”
That’s because most know it is never going to be business as usual again, and RBS’s public utterances are one of the many things to have been devolved by recent dramas.
What else has yet to be devolved, the mind can only boggle at.
The new pension freedoms are due to come into force next April, but that legislation is through the House of Commons yet. Neither are the “pot follows member rules”, nor the collective defined contribution pension regs.
A month later we are due to have a general election, when voters will get to choose what? Will Scotland and England get their own settlements to be crafted between now and then? Or will the whole of the UK become a federal union.
Where are the civil servants and parliamentary hours coming from to make all this happen? Will some if not all of this fall by the wayside, to make room for these more pressing matters.
And where will pensions lie in this new federal world? What will be the responsibility of nation parliaments? And what will happen with tax relief?
Before the vote, devo-max seemed to be on the table as the Westminster parties panicked and tossed in pledge after pledge. The SNP, to its credit, shouted dire warning that this all didn’t remotely add up to devo-max.
How I laughed to hear politicians of the main British parties change their tune almost immediately it became clear which way the vote was going. By 5am their representatives were innocently spouting over the airwaves: “The Scots were never offered devo max. Oh no, that was never on the table.”
You could have fooled me. I was not the only one left confused. Our dear friend Mr Farage asked if someone could please tell him whether the Barnett Formula was a done deal or not. Ah, politicians and snake oil salesmen.
Back to pensions. The SNP planned a slightly more expensive pension than the rest of the UK, postponing increases to the state pension age, guaranteeing the triple lock, and keeping Pension Credit.
Not only would this have cost Scotland 15 per cent more per head of working population, or £330 by 2032. It could have had serious implications for the benefits of auto-enrolment, which would offer questionable value for anyone on median earnings or below. Is all this now in the dustbin, or will Scotland retain rights over its pensions?
Similarly, from 2016 the Scots receive wide-ranging tax raising powers, under the Scotland Act 2012. Will they use them? Hard to say, they have never used the right to vary income tax by 3p contained in the 1998 Scotland Act. But if they don’t, what was the last 18 months about?
If they vary tax, then tax relief too will be different outside England, which will impact all kinds of pension saving, including occupational. No wonder so many companies are keeping an open mind.
There is a view that some institutions, pensions consultants, actuaries and advisory firms had invested so much time and energy in setting up contingency plans for a hasty move south, that this migration may now be slowed but not necessarily cancelled in its entirety.
It is just too exhausting for managements to live through these battles and turmoil every decade. One thing is for sure, the referendum did not shoot dead the Independence fox, and it will be back.