'Yes' vote could adversely affect pensions, warns Portal Financial

Portal Financial is warning that pensions and pensioners could be significantly adversely affected if Scotland votes ‘Yes’ in the upcoming Referendum.

Related topics:  Retirement
Amy Loddington
11th September 2014
Retirement

Private pensions with Scottish members will face increased costs, either from a forced move south to England where their majority customer base is or from increased costs associated with complying with a new regulatory regime. Over 21% of all Scottish employees work in the public sector and may be concerned about their unfunded but UK government promised pensions, and with over 2 million people (36.5% of the population) in Scotland aged over 50, the importance of the pensions question cannot be overstated.

The UK pension regulations require businesses to base their operations in the country where most of their customers are. For many Scottish institutions including Scottish Life, Scottish Widows and the Bank of Scotland, this may mean moving some or all of their operations to England if they want to continue to operate.

Scottish pension savers and pensioners may face foreign exchange issues even though the payment they receive may be guaranteed and paid as Sterling value. Furthermore, many schemes’ rules would not currently allow the scheme to cover the cost of making a foreign exchange payment and, if it does, the additional costs would need to be borne by either the scheme, all of its members, or by the pensioner that is affected.

Jamie Smith-Thompson, managing director of Portal Financial, said:

“The whole currency issue will make guaranteed incomes hard to commit to due to movements in foreign exchange rates. Under a Yes vote pension savers will be at the mercy of unpredictable exchange rates, and  a new regulator and most likely different rules and increased costs that will have to be funded either by members or their scheme.

“If Scotland ceases to use the pound, for those who have already annuitized and are living off their income, the real value of that income could change dramatically due to FX movements; it could go up or down but either way it makes a mockery of the concept of the ‘guaranteed’ nature of annuities.”

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