Pensions in Scotland After independence

bostonerimus

ewaste said:

bostonerimus said:

Maybe people could try to answer the question rather than commenting on Scottish Independence itself.

You've been on this forum long enough to know the user base.

Existing and future State Pensions based on accrual upto "Independence Day" should continue to be paid by the UK Government. This is the system that was contributed to hence why UK pensioners abroad continue to get their state pension. We don't expect any other foreign Governments to take over state pension provision. There would likely be a Social Security Agreement similar to many such agreements already in place for cost of living increases etc. After "Independence Day" accrual would need to begin under whatever Scottish system is created. Although there is currently no reason why voluntary Class 2 NI contributions couldn't continue to be made into the UK system.

As an expat who has continued to pay NI and is due to receive a UK State Pension you probably see this as the rational default. Although seemingly everyone believes that somehow Scotland warrants a special case because... 

Private Pensions well it doesn't really matter what Scotland does. The underlying assets have long since become part of a global system. It becomes an issue of taxation which is unlikely to change drastically for multiple reasons. 

Interesting! Under current rules someone resident in Scotland at independence could well be able to keep paying voluntary Class 2 NI into the into the UK system. But, I can't believe that will continue as having 5.5M potential new Class 2 payers might not be politically viable and would certainly put a burden on the UK system, but that's an interesting question. When it comes to Reciprocal Social Security Agreements etc I think the current UK/Ireland agreements and situation is probably a good model as the SNP wants to be in the Common Travel Area and have a similar status wrt any rump UK as Ireland - so freedom of movement, voting rights and SS agreements etc.

MK62

bostonerimus said:

ewaste said:

bostonerimus said:

Maybe people could try to answer the question rather than commenting on Scottish Independence itself.

You've been on this forum long enough to know the user base.

Existing and future State Pensions based on accrual upto "Independence Day" should continue to be paid by the UK Government. This is the system that was contributed to hence why UK pensioners abroad continue to get their state pension. We don't expect any other foreign Governments to take over state pension provision. There would likely be a Social Security Agreement similar to many such agreements already in place for cost of living increases etc. After "Independence Day" accrual would need to begin under whatever Scottish system is created. Although there is currently no reason why voluntary Class 2 NI contributions couldn't continue to be made into the UK system.

As an expat who has continued to pay NI and is due to receive a UK State Pension you probably see this as the rational default. Although seemingly everyone believes that somehow Scotland warrants a special case because... 

Private Pensions well it doesn't really matter what Scotland does. The underlying assets have long since become part of a global system. It becomes an issue of taxation which is unlikely to change drastically for multiple reasons. 

Interesting! Under current rules someone resident in Scotland at independence could well be able to keep paying voluntary Class 2 NI into the into the UK system. But, I can't believe that will continue as having 5.5M potential new Class 2 payers might not be politically viable and would certainly put a burden on the UK system, but that's an interesting question. When it comes to Reciprocal Social Security Agreements etc I think the current UK/Ireland agreements and situation is probably a good model as the SNP wants to be in the Common Travel Area and have a similar status wrt any rump UK as Ireland - so freedom of movement, voting rights and SS agreements etc.

There are no current rules regarding "someone resident in Scotland at independence"......those would come into force if and when Scotland became independent, and nobody knows what form they would take.......I very much doubt that Scotland would get everything it wanted either.

eskbanker

MK62 said:
There are no current rules regarding "someone resident in Scotland at independence"......those would come into force if and when Scotland became independent, and nobody knows what form they would take.......

Presumably the starting point for any discussion on such rules would be the existing ones for Scottish income tax though?

https://www.gov.uk/scottish-income-tax/who-pays

bostonerimus

MK62 said:

bostonerimus said:

ewaste said:

bostonerimus said:

Maybe people could try to answer the question rather than commenting on Scottish Independence itself.

You've been on this forum long enough to know the user base.

Existing and future State Pensions based on accrual upto "Independence Day" should continue to be paid by the UK Government. This is the system that was contributed to hence why UK pensioners abroad continue to get their state pension. We don't expect any other foreign Governments to take over state pension provision. There would likely be a Social Security Agreement similar to many such agreements already in place for cost of living increases etc. After "Independence Day" accrual would need to begin under whatever Scottish system is created. Although there is currently no reason why voluntary Class 2 NI contributions couldn't continue to be made into the UK system.

As an expat who has continued to pay NI and is due to receive a UK State Pension you probably see this as the rational default. Although seemingly everyone believes that somehow Scotland warrants a special case because... 

Private Pensions well it doesn't really matter what Scotland does. The underlying assets have long since become part of a global system. It becomes an issue of taxation which is unlikely to change drastically for multiple reasons. 

Interesting! Under current rules someone resident in Scotland at independence could well be able to keep paying voluntary Class 2 NI into the into the UK system. But, I can't believe that will continue as having 5.5M potential new Class 2 payers might not be politically viable and would certainly put a burden on the UK system, but that's an interesting question. When it comes to Reciprocal Social Security Agreements etc I think the current UK/Ireland agreements and situation is probably a good model as the SNP wants to be in the Common Travel Area and have a similar status wrt any rump UK as Ireland - so freedom of movement, voting rights and SS agreements etc.

There are no current rules regarding "someone resident in Scotland at independence"......those would come into force if and when Scotland became independent, and nobody knows what form they would take.......I very much doubt that Scotland would get everything it wanted either.

Yes, Scotland is still part of the UK, but the OP asked us to essentially speculate about pensions in an independent Scotland. The UK does have rules to allow continuing contributions to the UK NI system for people who have been in it previously and are working in a foreign country so I'm speculating that they might be applied. I think Scotland and the rump UK might well use the current UK/Ireland situation as a model. So anyone who has questions about how the relationship between the UK and an independent Scotland might evolve I'd recommend looking at the current UK and Ireland agreements. 

MK62

eskbanker said:

MK62 said:
There are no current rules regarding "someone resident in Scotland at independence"......those would come into force if and when Scotland became independent, and nobody knows what form they would take.......

Presumably the starting point for any discussion on such rules would be the existing ones for Scottish income tax though?

https://www.gov.uk/scottish-income-tax/who-pays

Perhaps, but who's to say?................anything we say here on this is just conjecture.......bostonerimus was talking about NI though, which isn't devolved, whereas income tax is (well almost).

Pensions_matter_2

The question of which currency an independent Scotland would (or could) use must also be a huge factor in all this, perhaps especially with funded pensions and where there are cross-border issues. A can of worms I suspect! Who knows what that could mean for future prospects.

eskbanker

MK62 said:

eskbanker said:

MK62 said:
There are no current rules regarding "someone resident in Scotland at independence"......those would come into force if and when Scotland became independent, and nobody knows what form they would take.......

Presumably the starting point for any discussion on such rules would be the existing ones for Scottish income tax though?

https://www.gov.uk/scottish-income-tax/who-pays

Perhaps, but who's to say?................anything we say here on this is just conjecture.......bostonerimus was talking about NI though, which isn't devolved, whereas income tax is (well almost).

Yes, the whole discussion is inevitably all conjecture - I was just meaning that attention has already been paid to defining what Scottish residency actually translates into when considering separating financial matters that were previously centralised at UK level.

bostonerimus

Pensions_matter_2 said:

The question of which currency an independent Scotland would (or could) use must also be a huge factor in all this, perhaps especially with funded pensions and where there are cross-border issues. A can of worms I suspect! Who knows what that could mean for future prospects.

Cross-border pensions are definitely complicated, but there are already provisions to allow someone working for a company in one country to pay into the pension plan in another country, there might be a window, or even an ongoing ability, where DC balances could be transferred across the border. Company DC plans would certainly have some work to do to implement any agreement, but there would be an agreement. The tax situation would follow the usual boilerplate and I'd point to the UK/Ireland agreements already in place.

Grumpy_chap

bostonerimus said:

I think Scotland and the rump UK might well use the current UK/Ireland situation as a model. So anyone who has questions about how the relationship between the UK and an independent Scotland might evolve I'd recommend looking at the current UK and Ireland agreements. 

The UK / Ireland model included a large chunk of the Island of Ireland remaining in the UK.  Which part of Scotland would the SNP consider should remain in the UK to support the justification of the similar type of model?

Any solution around Scottish independence would also need to be in the context of the SNP desire that an independent Scotland would quickly join the EU.  I can't imagine the EU or rUK would be quick to replicate the current RoI / NI arrangements.

The funding of pensions within an independent Scotland would have to accept that, although the state pension is a "contributory benefit" that has always been on the basis of time and there has never been a pension pot accruing from which the state funds current pension payments.  The current payments are only met through current taxation and that would go as a pair to the independent Scotland, unless the SNP  and rUK agreed to a scheme whereby Scottish residents continued to pay rUK taxes set by rUK Government at Westminster with no Scottish representation.  Can't imagine that being amenable to either side tbh.

bostonerimus

Grumpy_chap said:

bostonerimus said:

I think Scotland and the rump UK might well use the current UK/Ireland situation as a model. So anyone who has questions about how the relationship between the UK and an independent Scotland might evolve I'd recommend looking at the current UK and Ireland agreements. 

The UK / Ireland model included a large chunk of the Island of Ireland remaining in the UK.  Which part of Scotland would the SNP consider should remain in the UK to support the justification of the similar type of model?

Any solution around Scottish independence would also need to be in the context of the SNP desire that an independent Scotland would quickly join the EU.  I can't imagine the EU or rUK would be quick to replicate the current RoI / NI arrangements.

The funding of pensions within an independent Scotland would have to accept that, although the state pension is a "contributory benefit" that has always been on the basis of time and there has never been a pension pot accruing from which the state funds current pension payments.  The current payments are only met through current taxation and that would go as a pair to the independent Scotland, unless the SNP  and rUK agreed to a scheme whereby Scottish residents continued to pay rUK taxes set by rUK Government at Westminster with no Scottish representation.  Can't imagine that being amenable to either side tbh.

The UK/Ireland CTA and other arrangements were agreed between UK of GB and NI and the Republic of Ireland so they are a good starting point for possible UK/Scotland arrangements. The current freedom of movement for work and residence between The Republic and the UK is something the SNP wants for Scotland and the rump UK. Obviously the Republic of Ireland is in the EU and if Scotland was to ever join the EU the trade issues would be major as obviously there's a lot of trade between England/Wales/NI and Scotland. Putting up trade barriers between yourself and a large economic partner is not something to be done frivolously. 

As far as state pension is concerned the a version of then current reciprocal social security arrangement with the Republic could be implemented. The biggest issue might end up being having 5.5M Scottish citizens eligible at some time to pay voluntary Class 2 NI and get full UK state pension as well as any new Scottish state pension. That loophole would have to be closed.