{"id":91668,"date":"2025-08-25T13:16:07","date_gmt":"2025-08-25T13:16:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/91668\/"},"modified":"2025-08-25T13:16:07","modified_gmt":"2025-08-25T13:16:07","slug":"our-independent-scotland-pension-system-would-be-unique","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/91668\/","title":{"rendered":"Our independent Scotland pension system would be unique"},"content":{"rendered":"

\n There is currently no pension<\/a> system like it anywhere else. While countries such as the Netherlands<\/a>, Sweden and other Scandinavian countries have highly regarded pension systems, they still operate in accordance with orthodox ideas about public finances and the management of pension fund investments.\n<\/p>\n

\n The proposals for a new earnings-related pension system for Scotland, comprised of a state earnings related pension (SERP) and a National Pension Fund (NPF), are derived from the understanding that a state which issues its own currency is not constrained by any supposed \u201cshortage of money\u201d and does not rely on taxation<\/a> to finance public services and benefits<\/a> such as pensions.\n<\/p>\n

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\n Although Sweden<\/a>, for example, issues its own currency (Swedish Krona) its pension system is based on the belief that the state pension is financed by pension contributions (16% of earnings) and that any shortfall between contribution income and pension payments must be funded from elsewhere.\n<\/p>\n

\n Sweden deals with any fiscal deficit attributable to state pension through a transfer from five \u201cbuffer funds\u201d which were established at various times in the past.\n<\/p>\n

\n The \u201cAP Funds\u201d or \u201cAllmanna Pensionsfonder\u201d (Public Pension Funds) provide financial support to the state pension system.\n<\/p>\n

\n Unlike normal pension funds, they do not pay pension benefits<\/a> and they do not have any contributing members.\n<\/p>\n

\n The Swedish state provided the initial capital and the funds have subsequently grown in size so that they now manage SEK2.1 trillion of assets (about \u00a3160 billion).\n<\/p>\n

\n Their creation was based on the belief that, despite having its own currency, the Swedish state can suffer from a shortage of money and depends on investment returns generated by the AP Funds.\n<\/p>\n

\n The proposed Scottish pension system assumes the state can and will pay SERP benefits in full and that this is derived from having our own currency.<\/a>\n<\/p>\n

\n However, it also depends on the Scottish people electing governments that understand that, for a currency issuer, taxes are not required to pay for public services or welfare benefits such as a state pension. If Scotland is governed by politicians who maintain the belief that tax (including National Insurance<\/a> contributions) pays for public spending, a new earnings-related pension system, consisting of a SERP and a NPF, would not be viable.\n<\/p>\n

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\n How much of SERP spending was balanced by taxation would be a matter for overall fiscal policy and will depend on whether Scottish governments<\/a> choose to run a deficit attributable to SERP spending.\n<\/p>\n

\n The\u00a0intended role of the NPF is not to finance any pension-related fiscal deficit. Its role would be to provide a defined-benefit second pension.\n<\/p>\n

\n The Scottish state would provide a guarantee to the NPF in the event that there was a shortage of liquidity to cover pension payments. It could do this if it is the currency issuer of a Scottish pound and if governments understand the greater policy space they can operate with as a currency issuer.\n<\/p>\n

\n To summarise, based on an understanding of the fiscal capacity of a currency issuer, the Scottish state can provide a SERP and also underwrite the NPF and the DB second pension scheme \u2013 the opposite of the Swedish model where non-state \u201cbuffer funds\u201d guarantee the fiscal neutrality of the state pension.\n<\/p>\n

\n If the Scottish state is a currency issuer it is valid to ask why shouldn\u2019t the SERP be the source of all pension benefits and why bother with a NPF?\n<\/p>\n

\n If we were starting from scratch, having a SERP as the only source of pensions would be an option. However, we are not starting from scratch because Scottish citizens now own about \u00a3250bn of assets held in UK<\/a> pension funds (out of a total of about \u00a33 trillion UK pension assets).\n<\/p>\n

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\n Many of these are in defined contribution (DC) pension schemes, such as the UK NEST, multi-employer, DC pension scheme, which currently has more than 13m members and more than \u00a340bn of assets under management. These funds are failing to provide capital for productive purposes.\n<\/p>\n

\n The objective of the proposed NPF is firstly to create a new DB-based fund into which Scottish citizens can transfer their existing second pensions, and to function as the provider of a defined benefit second pension in addition to the SERP.\n<\/p>\n

\n Secondly, the NPF would also function as a wealth fund, managing its investments primarily to support the transition to a wellbeing Scottish economy and building the future productive capacity of the economy<\/a> so that the needs of all can be met.<\/p>\n","protected":false},"excerpt":{"rendered":"There is currently no pension system like it anywhere else. While countries such as the Netherlands, Sweden and…\n","protected":false},"author":2,"featured_media":60454,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[84,4176,4174,4175,56,54,55],"class_list":["post-91668","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-personal-finance","tag-personalfinance","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/91668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=91668"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/91668\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/60454"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=91668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=91668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=91668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}