Scotland politics

Scottish independence: Think tank concern over 'Yes' state pensions

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Image caption The Scottish government said it had set out plans for an affordable and fair pensions system under independence

An independent Scotland with the same state pension policy as the rest of the UK may find it difficult to afford pensions, a think tank has claimed.

The Pensions Policy Institute (PPI) said a future Scottish government would need to raise tax, cut spending or accept higher debt.

Scots ministers said social protection was more affordable in Scotland.

Shadow pensions minister Gregg McClymont said the UK made them affordable north of the border.

The think tank report came ahead of the 18 September independence referendum.

In a paper submitted to the Scottish Parliament's finance committee, the PPI said, despite lower life expectancy levels overall for Scotland, the population was ageing more quickly than the rest of the UK.

The UK state pension is paid to men from 65 and women from 61, but the age is to increase to 67 for all by 2028.

The Scottish government has said the basic state pension would continue to be paid "on time and in full" under independence and that, from 2016, new pensioners would be given £160 a week.

Ministers also said an expert commission set up in the first year of independence would consider the appropriate level of the country's state pension age.

The PPI said of the Scottish government's proposals: "The overall impact of the Scottish government policy proposals on annual pensioner benefit expenditure would be to further increase expenditure per working age individual in Scotland.

Background and analysis

"After allowing for expected changes in earnings, and focusing on the difference between Scotland under the Scottish government proposals and the UK as a whole, the difference peaks at £330 per individual of working age in 2032, where Scotland would still have a lower state pension age than the rest of the UK - £180 of this is due to the policy changes, with the remainder due to underlying demographic differences."

The PPI added: "Although the proposals put forward by the Scottish government would increase expenditure on pensioner benefits, if implemented, they could also lead to higher state pension incomes for pensioners in Scotland compared to the rest of the UK, depending on the final level of the single-tier pension on introduction in 2016 and the rate at which it is increased."

Ms Sturgeon said her government had set out plans for "an affordable, fair and efficient pensions system" in an independent Scotland.

She added: "The fact is that social protection spending, which includes pensions and welfare, is more affordable in Scotland than in the rest of the UK - and has been so for the last five years.

"We already know that we need to grow our working age population and that is exactly why we have set out the benefits to our economy of improving productivity, increasing employment and securing population growth, which can deliver an additional £5bn a year by the end of a 15 year period.

"The challenge of supporting an ageing population comes regardless of the outcome of the referendum - but it is only independence that gives us tools to tackle it."

Mr McClymont, speaking on behalf of the Better Together campaign for the Union, said: "Pooling and sharing our resources across the whole of the UK means pensions are more affordable in Scotland.

"Experts have made clear that if we walk away from the UK we would need tax rises or spending cuts to pay for pensions in Scotland.

"We don't need to take that risk. If we say 'no thanks' to leaving the UK, we can have the best of both worlds - a strong Scottish Parliament, with more powers for Scotland guaranteed; and the protection for our pensions that comes from being part of the larger UK."