Irwin Mitchell Lawyer Comments On Nicola Sturgeon’s Suggestion For Second Referendum

A vote for Scottish independence resulting from a second independence referendum could mean confusion for the pensions industry, according to an expert at a leading law firm.

Penny Cogher, Partner and pensions expert at Irwin Mitchell, highlighted the fact that Scotland voting to leave the UK could potentially affect the regulation and funding of pension schemes.

The comments follow Scottish First Minister Nicola Sturgeon’s call for a second independence referendum – ‘Indyref 2’ – in the wake of the Brexit bill being passed on Monday evening. This paves the way for the government to trigger Article 50 and begin the process of the UK formally leaving the European Union.

Prime Minister Theresa May has not yet said whether she would grant permission for a second independence vote – but it has been speculated she will delay Ms Sturgeon’s plans until after the Brexit process has been completed.

On Monday, Ms Sturgeon said that she wanted to hold a referendum between autumn 2018 and spring 2019 – and that Holyrood should have the power to decide on the precise date. But Mrs May could refuse permission for an independence vote to take place until Brexit is fully completed in two years’ time.

Ms Sturgeon’s Scottish National Party (SNP) is predicted to win such a vote together with the support of the Scottish Greens, who are also pro-independence.

Expert Opinion

“Cross-border funding, such a key issue for Indyref 1, would fall away as an issue now that the UK is bent on leaving the EU.

“Instead Brexit may result in two different regulatory pension systems – one EU-based for pension schemes based in Scotland, and one not. Pension schemes do not have their own legal entity – they are based where their trustees are based. We may find Schemes could arbitrage where they are based and so which systems of laws they must comply with. They may prefer to be in a non-EU regulation-based environment, or they might want to take advantage of Scotland's more pragmatic laws for executing documents, making documents much less expensive than in the UK.

“There is also a question as to whether Scottish-based schemes will be able to afford their own Pension Protection Fund, and whether Edinburgh as the heart of the financial services industry can expect special terms from England on independence.

“We could also see greater divergence between Scots public sector pension schemes and the English-based schemes than we have already. State pension schemes could also diverge, as the SNP has stated it wants to upgrade state pensions in Scotland if it can."

“One area of opportunity could be QROPS, the qualifying recognised overseas pension scheme whose tax advantages were curtailed for UK citizens in the recent Budget. Could Scotland become the new home of a new type of QROPS?"

“Whatever happens, there certainly will be a period of confusion and adjusting – maybe something the industry could just do without at the moment, given the recent onslaught it has faced.” Penny Cogher - Partner

Read more about Irwin Mitchell's expertise in pensions law.