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Independent Scotland could struggle to meet state pension costs

An independent Scotland could be forced to increase taxes to fund Alex Salmond’s state pension plans, according to the Pensions Policy Institute.

The UK Government has set out plans to introduce a single-tier state pension worth around £144 a week in April 2016. In addition, the DWP has proposed linking the state pension age to life expectancy.

In a policy paper on independencee published by the Scottish government last November, it committed to increasing the single-tier state pension from £144 a week to £160.

It also proposed keeping the pensions triple-lock for at least the first term of the next Parliament. That would see pensions rise in line with inflation, prices or 2.5 per cent, whichever is greater.

A PPI submission to the Scottish parliament Finance Committee says despite lower life expectancy levels overall in Scotland, the population is ageing more quickly than in the rest of the UK. The number of pensions relative to working age people is also increasing faster than the UK as a whole.

The PPI says this will make it more difficult for an independent Scotland to meet the costs of state pensions because it will have a relatively smaller working age population funding pensions for increasing numbers of older people.

PPI director Chris Curry says: “The increased state pension spending implied by the plans of the Scottish Government is not necessarily unaffordable.

“However, the Scottish government would need to either raise higher revenues (for example through taxation), reduce spending in other areas (for example where demographic pressures are less), or have higher Government debt levels.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. “Independent Scotland could struggle to meet state pension costs”

    Every country that has them struggles to fund a payg state pension system some are just going to struggle more than others and will have to upset one group or another. Taxpayer largesse is not inexhaustible as Ireland and Greece are demonstrating.

  2. As above this is the same problem facing the UK who also cannot afford its state pension.

    What an independent Scotland will have is higher levels of tax per head of population not to mention our future oil wealth so I am sure we will manage to balance the books.

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