A yes vote in tomorrow’s referendum could see pensions administrators facing some complex issues if Scotland becomes independent, according to analysis by the Pensions Administration Standards Association (PASA)
PASA says a yes vote would technically lead to the creation of cross-border schemes, presenting significant tax, regulatory and legislative differences for administrators to tackle. The independent body, which has the goal of driving up standards in pensions administration, warns the change could create different scheme registration, administration and scheme funding requirements.
Margaret Snowdon, chair of PASA, said: ‘This would make it necessary to distinguish between a Scottish and “rest of the UK” status for scheme members, and there are already suggestions that HMRC would need to determine who fits into which category. If members change their status during their working lifetime, this could add further complexity to administering their benefits.’
Snowdon pointed out that it is also possible that the state pension age for Scotland would be different from the rest of the UK, which may impact on processes for calculating member benefits. This could have implications linked to automatic enrolment entry requirements, or could mean a different overall tax regime.
Splitting into two countries is also likely to mean that trustees and administrators may need to register under any new Scottish regulatory regime for pension administration, data processing and investments of contributions, thereby increasing management and regulatory overhead.
In addition, a Scottish version of the Pensions Regulator, Financial Conduct Authority, Pension Protection Fund (PPF) and potentially other professional bodies, could add complexity in administration.
There may be a need to split scheme data for completion of UK and Scottish regulator returns and also possibly to pay separate PPF levies.
Meanwhile, a different currency would add significant complexity for pensioner payrolls, potentially impacting on member contributions where rates have been set in one currency and are being paid in another. Additional administrative procedures might be required in connection with setting contribution rates and collecting contributions. Fluctuating currency exchange rates would also need to be considered.
Snowdon said: “Even if there is a no vote, increased devolution is likely to continue, creating increased differences in the pension rules and regulations from the rest of the UK.’