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Pensions and retirement planning


Pensions in an independent Scotland

Ian Naismith

The Scottish Government has published its plans for pensions if Scotland becomes independent following the 2014 referendum.

Existing state pensions would continue, with guaranteed ‘triple lock’ increases throughout the first term of a Scottish Parliament. This means yearly increases of the highest of price inflation, earnings inflation and 2.5%, and is currently only guaranteed until 2015.

For new pensioners from April 2016, the proposed single state pension would apply in Scotland at a rate of at least £160 a week − probably a few pounds higher than elsewhere. Scotland would retain state pensions based on a spouse’s National Insurance record and the savings credit element of pension credit.

Scotland has a lower life expectancy than the whole UK, and an independent commission would consider an earlier state pension age. Arrangements would be made for those who migrated between Scotland and the rest of the UK.

Existing occupational and personal pensions would continue in an independent Scotland, and roll-out of automatic enrolment would continue, with a Scottish version of NEST. Existing regulation would also continue with few alterations; there would be a Scottish Pensions Regulator, a financial compensation scheme and continuing use of the Pension Protection Fund.

Transitional arrangements would be negotiated for pension arrangements that became cross- border schemes. Public sector pensions would continue as at present, but the Scottish government would aim to have a less confrontational approach to changes.

The proposals are hypothetical, but are designed to demonstrate that the SNP has considered the issues that will arise from independence. Regardless of whether or not independence happens, the Scottish government will set a rate of Income Tax from April 2016, which could be different from the rest of the UK and so affect tax relief. One way or another, things are likely to become more complex for employers, providers and advisers.


Government considers total auto-enrolment commission ban

Tom Selby

As part of a drive to protect savers from high charges, the Government has confirmed that it is considering a blanket ban on commission in automatic enrolment pension schemes.

The Department for Work and Pensions (DWP) published a consultation on 30 October, setting out proposals to cap charges for auto-enrolment default funds. The DWP is contemplating a charge cap of 1%, 0.75%, or a two-tier ‘comply or explain’ cap.

Under ‘comply or explain’, employers would have access to a 1% charge cap but would have to explain to The Pensions Regulator why the scheme charges over 0.75%. In addition, the DWP has asked for views on whether commission should be banned in auto-enrolment qualifying schemes.

It says: “There is some anecdotal evidence that there was a spike in sales of GPPs in the months leading up to the introduction of the RDR. If this spike in sales was a rush to set up schemes with commissions to be used for automatic enrolment, this would be a cause for concern. We are interested in receiving views on whether commission should be banned and any evidence on the potential impacts of this measure.”

The ban would have a retrospective impact on all schemes used for auto-enrolment. The Office of Fair Trading recently recommended banning pension schemes with built-in adviser commissions for new members but this paper suggests the Government may go further. Experts have previously warned banning commission for auto-enrolment could cost advisers £150 million and 1,000 jobs.



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