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Providers: Scottish independence could end pension tax relief for millions

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Over a million savers paying into pensions run by Scottish insurers could be unable to claim tax-relief if Scotland votes in favour of independence next year, a senior industry figure has warned.

Insurers have privately agreed not to publicly discuss the implications of a “yes” vote due to concerns about the uncertainty this could create, but one provider told Money Marketing that because an independent Scotland would not automatically gain EU membership, the future of tax-relief on pension contributions could be thrown into question.

The source says: “At the moment, if you are in Europe, you get tax-relief if you contribute to a pension in another country. That is enshrined in European law.

“The problem for Scotland is the European Union has already said it will not automatically gain EU membership.

“So on day one of independence you would have a country outside the European Union which is not covered by the EU doctrine on tax-relief, which means the approximately 1.8m English customers paying into a Scottish company would not get tax relief and the 200,000 Scottish customers paying into an English company would not get tax relief.

“Independence is an unholy mess and it would be a disaster for Scottish financial services, which is why nobody wants to speak about it.”

There is also concern among insurers about the impact a “yes” vote would have on the Scottish financial services market in general.

One source says: “Who wants to serve a market with 2.5 million adults in it compared with a market with 50 million adults in it?

“You would end up with very few providers in the Scottish market.”

Forty Two Wealth Management partner Alan Dick says: “Independence could be a disaster for Scottish financial services.”

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. “One source says: “Who wants to serve a market with 2.5 million adults in it compared with a market with 50 million adults in it?”

    Ah, that explains why Monaco and Liechtenstein have no financial services and operate a barter economy.

  2. So, companies quoted on the UK stock exchange will suddenly be removed will they?

    More bull from the powers that be.

  3. ‘One source says: “Who wants to serve a market with 2.5 million adults in it compared with a market with 50 million adults in it?”

    ‘Ah, that explains why Monaco and Liechtenstein have no financial services and operate a barter economy.’

    Yes – maybe Monaco and Liechtenstein should think about operating a hugely successful financial services based economy for the millions of people OUTSIDE these countries.

    No…wait.. I forgot – they already do.

    Think will happen in Glasgoooo?

  4. Indeed. A customer base of 2.5m roughly equates to the Republi of Ireland’s financial services sector. The auguries are not good…

  5. The source obviously hasn’t got as far as using google. Iceland, Leichtenstein and Norway – none of which are EU members – have arrangements in place with the UK to allow transfers between each other without triggering unauthorised payment charges so worst case scenario, benefits could be transferred. Income already being received – again, UK has arrangements in place to avoid double taxation with many economies e.g. Australia. Is it beyond the wit of man to make such necessary arrangements?

    The other source needs to be told that it’s not the 1920s and financial services companies tend to be cross-border, if not global these days. Of the four large Scottish insurers, only one is not owned or merged with a non-Scottish company.

    There are many arguments for and against independence. I’m not seeing any in this piece. Slow news day.

  6. This is absolute nonsense and scare mongering. Regardless of political views this nonsense has to be challenged.

  7. I am vehemtly anti-independence but this sort of drivel harms both pension providers and customers alike.

    It’s another reason for people to not save for retirement. Perhaps Money Marketing would like to give a more balanced view on things rather than just quoting anonymous sources!

  8. @James – I am of course aware that there are huge differences between Monaco and Scotland – in particular the relative wealth – all I wanted to do was illustrate that the argument as presented (small market = little demand = no supply) is absolute nonsense.

    Having a small population is not a problem in and of itself, if you have a productive economy… and I will leave it there.

  9. The problem with the Scottish independence debate (and it’ll be the same for the UK/EU debate) is that so much is conducted at one level (quite often descending into the yah/boo school playground argument).

    But like so much in life, the devil is in the detail, and there’s quite a lot of detail in the paper recently issued by HMG. Whilst it may all be surmountable (or may not perhaps) it’s not sensible to simply dismiss the issues raised without serious consideration.

    I suspect much will come down in the end to a blind leap of faith in the end. Rather like the UK/EU trade debate – will the EU impose tarrifs if we leave and don’t meekly submit to EU diktats as Norway has to – or would be the start an Icelandic style “trade war”. Who knows?

  10. @Sascha

    Small market=little demand=little supply is not nonsense. It is basic economic reasoning.

    There are of course exceptions to every rule e.g. Monaco et al.

    Anyway – you sort of answered it yourself when you referred to the need for a productive economy.

    Scotland isn’t.

  11. I have money in Scotland and would definately move it back to England if independence went ahead.

    I wouldn’t want my money in a foreign country.

  12. I’m sure if it was an issue they would re-locate their HO to England if required.

    Another poser is whether other investments would then be classed as offshore investments?

  13. The UK life industry has for decades included companies with Canadian, Australian and South African parentage. They have all ben able to offer pensions with tax relief for UK customers. Why would it be any different for companies with Scottish parentage? As other commentators have said, this is simply scare-mongering drivel.

  14. As a pension saver with funds in both Standard Life and Scottish Widows pensions I have concerns about the big “What If?” questions.

    What if Scotland goes independent and adopts the Euro? Will my investments be denominated in Sterling or Euros? If the latter, should I repatriate my pension to avoid currency risks? What would be the correct financial advice to a customer in England with a Euro denominated pension?

    If Scotland goes independent and is temporarily outside the EU, what are the implications for me? what financial protections do I have?

    If Scotland goes independent and adopts the Euro and sees massive outflows of investment, will the Scottish government be able to introduce currency controls to prevent this? If so, how does that affect my investments?

    Yes there is lots of playground name-calling in this debate, and lots of mud being thrown by the UK government. But anyone who looks at the financial implications of splitting a country, as happened when Czechoslovakia turned into the Czech Republic and Slovakia, should be concerned about how customers are likely to behave.

    I wrote to both my pension providers and asked what planning they were doing. Scottish Widows told me in detail, Standard Life told me not to worry because they will always be big and strong!

    Somehow I feel less than reassured.

  15. Following these comments on the fact that Norway, Monaco and Lichtenstein have big financial services industries, can any of the advisers on here tell me how often they advise their normal customers (i.e. less than super-rich) to invest in those countries, and why?

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