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Funding Pensions in Scotland: Would Independence Matter?

Published online by Cambridge University Press:  01 January 2020

David Bell ,
David Comerford  and
David Eiser
David Bell*
Affiliation:
University of Stirling
David Comerford
Affiliation:
University of Stirling
David Eiser
Affiliation:
University of Stirling
*
E-mail: d.n.f.bell@stir.ac.uk
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Abstract

Economic issues will be key determinants of the outcome of the Scottish referendum on independence. Pensions are a key element of the economic case for or against independence. The costs of funding pensions in an independent Scotland would be influenced by mortality risks, the costs of borrowing and the segmentation of costs and risks (i.e. pricing to Scotland's experience rather than pooled across UK experience). We compare the overall costs of providing pensions in an independent Scotland against the resources that are available to cover these costs. Scotland has worse mortality experience than the UK as a whole, and Scottish government debt is likely to attract a liquidity premium relative to UK government debt. An independent Scottish government would have to create a bond market for public debt. The liquidity premium would make pensions cheaper to buy, but taxpayers or the consumers of public services would have to pay the cost.

Keywords

pensionsbondsindependencerisk poolingmortalityyieldsH10H11H20H21H30H50H72H73H77
Type
Research Articles
Information
National Institute Economic Review , Volume 227 , February 2014 , pp. R21 - R31
Copyright
Copyright © 2014 National Institute of Economic and Social Research

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References

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