How an independent Scotland could manage the cost of pensions

The Herald reveals that the Scottish National Party is apprehensive about the potential size of the benefits bill. As benefits are the largest element in UK spending, there should be no surprise. Equally, it should be obvious that the largest element in the benefits bill – two thirds of spending – goes on pensions, and while Scotland has slightly lower expenditure on pensions than England, this is the part of the benefits bill that is most likely to increase over time.

It would be difficult however to manage pensions in an independent Scotland, for two reasons. The first is that state pensions are contributory, and the existing system could only be maintained through a massive transfer of detailed work records. The second is that transitional people’s rights will be complex, and it is liable to last for fifty years or more. Fortunately, there are straightforward answers to both problems. The quick way to deal with the first problem is to move to a Citizens Pension. The government could de-couple basic pensions from prior commitments, dividing any legacy fund available for S2P among those entitled, and otherwise ignoring for the purposes of benefit administration additional income or additional pensions. The way out of the second problem is to buy out people’s rights.

Leave a Reply