The date for the Independence Referendum in Scotland has now been set for 18 September 2014. This article focuses on key points for companies and trustees in the lead up to the Referendum.
The Referendum will precede the impact of the Scotland Act 2012 which will come into force in 2016. The Act allows the Scottish Government to apply differential rates of income tax up to 10%. For many schemes, which operate on a 'net pay' basis, there will be little impact. The residence based test which affects the decision on the relevant tax rates which will apply could lead to increased administration. The analysis of residence English or Scottish tax payers will be at the end of tax year – potentially leading to administrative hassle in applying the relevant tax reliefs retrospectively. Tax payers may seek to argue the area with the most advantageous outcome is valid, an area ripe for arguments and future case law.
If a yes vote is the outcome of the Independence Referendum, it will be followed by a period of negotiation among the Scottish Government, Westminster and Europe. Key themes in the pensions debate have continued to emerge. These include:
- Regulation of occupational pensions and which Regulators would enforce the operation of pensions
- Taxation of pensions and reliefs which would apply
- Funding of public sector pensions in Scotland
- The European aspects of pensions – European membership, currency and cross border solvency issues. At present, enhanced funding arrangements apply for UK schemes with membership in different EU members states, and
- Schemes which have used Scottish Limited Partnerships for asset-backed contribution arrangements will need to look carefully at the impact of independence on these arrangements.
The future strategy for pensions in Scotland will be key to scheme members, employer and trustees.