Independent Scotland would "reconsider" state pension age, according to Scottish Government paper

The proposal is part of a Scottish Government report setting out how pensions would be negotiated, governed and guaranteed in the event of a vote in favour of Scottish independence in September 2014.

"Scotland is a wealthy and productive country with strong financial foundations – we can more than afford a decent pensions system that guarantees dignity for our older people," said Nicola Sturgeon, Scotland's Deputy First Minister.

"Successive UK government decisions have resulted in a pensions crisis. Independence will bring decision-making on pensions home to the Scottish Parliament and provide the opportunity to do things differently and better. As this comprehensive paper makes clear, we will build on the current system and make improvements where necessary," she said.

The SPA for women in the UK is due to rise from 60 to 65 to match that of men from 2018, before it increases to 66 for both sexes in October 2020 and to 67 by 2028. The Pensions Bill, which is currently before Parliament, contains provisions which would allow the Government to carry out a review of the SPA every five years to ensure the system is sustainable, to be based on analysis of life expectancy projections and other relevant factors.

The Scottish Government's paper confirms that the Scottish state pension post-independence would be based on the current UK state pension. A single tier pension will be introduced for new pensioners from 2016, on the same basis as that being introduced south of the border. An independent Scottish Parliament would also commit to protecting the value of the Scottish state pension through the 'triple lock' for at least its first term. This is a guarantee to uprate the basic state pension annually by the highest of 2.5% or the increase in earnings or prices.

An independent Scotland would retain the savings credit element of pension credit, which is due to be abolished in the UK when the single tier state pension comes into effect in April 2017, according to the paper. It would also put "safeguards" in place for those who are expecting to receive a state pension based on their spouse's contributions.

A Scottish Pensions Regulator would be established to protect and monitor pensions post-independence, in the same way as the Pensions Regulator does currently, according to the report. This regulator would "work closely with the UK Pensions Regulator and the Financial Conduct Authority to maintain a pan-UK approach to the regulation of private pensions", according to Scottish Finance Minister John Swinney. A Scottish Employment Savings Trust would also be set up as a Scottish replacement for the National Employment Savings Trusts (NEST) to fulfil automatic enrolment requirements; and savers on Scottish pension schemes would continue to receive the same level of protection as they do currently from the Pension Protection Fund and Financial Services Compensation Scheme.

The report indicates that an independent Scotland would "reserve judgement" on the issue of automatic increases to the SPA, in particular the proposed increase to 67 between 2026 and 2028. An Independent Commission on the SPA would be established to consider an appropriate rate of increase in Scotland over the long-term appropriate to Scottish circumstances, including life expectancy, affordability and "fairness with comparable workers elsewhere", it said.

However pensions expert Ian Gordon of Pinsent Masons, the law firm behind Out-Law.com, said that the report was "much more measured" on this issue than the reaction of the press indicated.

"The issue of possibly changing the state pension age is to be referred to a 'commission' to assess its feasibility," he said. "The report does not set out any immediate commitment to do anything other than to look at the issue."

"Similarly, the report itself states that the 'long-term affordability challenge' for pensions needs to be 'firmly set within the context of sustainable economic growth'. So there are no giveaways about how an independent Scotland would pay for an earlier state pension," he said.

The report also considers the impact of independence on cross-border pension schemes; an issue that was highlighted by the Institute of Chartered Accountants Scotland (ICAS) in May. European solvency rules require pension schemes operating across national borders to be funded in full, with any underfunding rectified immediately. The Scottish Government proposes to begin negotiations on transitional arrangements for pension schemes operating in both Scotland and the rest of the UK to begin "immediately", as many of the affected schemes are currently operating at a deficit within the UK.

Christine Scott, ICAS' Assistant Director for Pensions, said that the paper was a "useful contribution" to the debate on pension regulation and provision in an independent Scotland, and urged the authorities to begin the necessary discussions.

"Employers and pension scheme trustees need information and time to make contingency plans for how any transitional arrangements which may be put in place will affect their schemes," she said. "Any solution to the potential cross-border under-funding issue will likely need the agreement of every EU member state, and ICAS now calls on the UK and Scottish governments to begin discussions with the European Commission."