THERE are a few topics in the independence debate that will likely never go away – currency, borders and pensions being the big three – and nor should they. They are important topics and the latter particularly affects people in a profound and direct way.
It is incumbent on all of us involved on both sides of Scotland’s constitutional politics to be able to discuss these topics in detail and in a way that furthers the debate. By that, I mean not simply shouting at the other side that they’re wrong or that their vision of “tomorrow” will be worse than “today” but to be able to explain how their own vision of “tomorrow” will be better too.
For those on the pro-Union side of the debate it means facing up to the decades of failures in UK pension policies – culminating in rapidly rising state pension ages, mismanaged private pensions, and the betrayal of trust of hundreds of thousands of WASPI women (including my own mother, who as a result of those changes has ended up having to work as a front-line carer during a global pandemic, when she should have retired several years prior).
It also means approaching the constitutional debate with something more constructive than the threats of discrimination and destitution too many have been too willing to deploy. A Union held together out of fear, uncertainty and doubt is not one designed to last or one designed to work for the greater good of its citizens.
On the other side there is much to do as well.
READ MORE: Open Minds on Independence: What happens to pensions after a Yes vote
Attacking the shortcomings of the UK’s policies is relatively straightforward and slogans like “the lowest state pension in the developed world” does fit neatly on a campaign billboard, but there are nuances in here that must be discussed if we, too, are going to progress the debate.
That campaign slogan has the advantage of being true, but the state pension is only one part of the equation. Many (though, importantly, not all) pensioners derive retirement income from their private pensions and from “capital investments” (which usually means selling and downsizing a house).
Taken over the whole field, a typical British pensioner’s overall income is still below the OECD average, but only by a little. What the UK has done over the past several decades is shift the responsibility of providing post-retirement social security from the state and collective public to the private sector and the individual.
Around half of a typical British pensioner’s income comes from those private sector sources whereas in many OECD countries – including some with the highest relative pensioner income rates – a much higher percentage of that income comes from public sources.
In 15 OECD countries, pensioners derive more than 90% of their income from state and public sources. The advantage of this latter system should be fairly obvious.
The private sector has an overriding profit motive rather than a wellbeing motive. This showed in the UK where, until legislation was introduced in the last few years to cap it, UK private pension schemes had some of the highest fees compared to our neighbouring countries. Tens of thousands of pounds of your private pension investment went not to you but to the pockets of the shareholders behind the firms managing your pensions.
Even in an improved system, an over-reliance on capital and private pensions leads to extreme vulnerability for pensioners. All it takes is a housing bubble bursting or a financial crisis causing share prices to plummet and a private pension scheme can have a substantial portion of its pot wiped out. If this happens just a few years from your own retirement you won’t have time to rebuild those savings before you need them.
Even for those of us who are more than a few years away from retirement the increasingly fragmented UK job landscape has its own problems.
The “Defined Benefit” (or “final salary”) pension has largely disappeared along with the “job for life” where you could more-or-less rely on staying with a single company and its pension scheme for your entire career. A typical British worker today will work for six different companies across their working life and retire with eleven different pension pots (with the future for workers in the “gig economy” looking even more fragmented than that).
It is almost impossible to keep personal track of the movements of all of these pots and even though the annual fees for each of them is now capped, the fees involved in transferring and consolidating them is prohibitive and the system for doing so often complicated.
For these reasons it is important that any discussion about pensions in the UK or in an independent Scotland must consider the system as a whole rather than over-focusing on just one area. I do want to see the state pension increased or, even better, outright replaced with a Universal Basic Income which would help people gradually reduce their working hours rather than hitting the “cliff-edge” of transitioning from a “Worker” on Friday to a “Pensioner” on Monday.
READ MORE: Open Minds on Independence: The UK's worst state pension in developed world
I want to see the proportion of pension income coming from public pensions increased so that individuals aren’t at the mercy of the stock market (or their brokers). I’d also like to see Scotland make it easier to keep a private pension together even when moving jobs or to consolidate fragmented pots – perhaps an independent Scotland (or maybe even a devolved one) could set up a National Pension Company to provide a not-for-profit employment pension scheme similar to that found in Sweden and other countries.
Pension politics are as important as they are complicated. They also involve state planning on a time scale that democracies struggle to cope with – any change to any pension policy may not come into operation until long after the Minister introducing the change has been voted out or has retired themselves. But “hard” isn’t an excuse for inaction.
So, we who want to make tomorrow better than today (regardless of our stance on the constitution) should be prepared to do the work to show how it can be done. This goes for me too and I’ll be spending my time at Common Weal preparing for any upcoming independence campaign by providing the answers that we don’t yet have on any of the issues we haven’t already covered in the past seven years.
I’ve given a couple of hints of some of the ideas we’re working with at the moment, but that’s just the start. We’ll be back with comprehensive proposals in due course.
If as much effort was put into constructive work as has been put into fear-mongering or pretending that questions have been answered when they haven’t, the constitutional debate in Scotland would be much more productive and much further down the line than we are at the moment.
Dr Craig Dalzell is the Head of Policy and Research at the “think and do” tank Common Weal
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