I have just returned from holiday, in early august before I went away the general consensus appeared to be that the vote in Scotland on 18th September would be a “No”. However, on my return there seems to have been a huge shift in opinion and a “Yes” vote is becoming a reasonable possibility.
Many clients who had not given the matter much thought are now making enquiries as to what may happen to their investments and pension arrangements if the answer is “Yes” and whether they should take any action. The answer to such questions is that there is no need to panic or to take any immediate action. If your investments or pension plans are held with UK Providers, there is no problem at all. If however, if you hold investment or pension plans with Companies established in Scotland there is no need to panic because if there is a “Yes” vote then Scotland will remain part of the UK until 24 March 2016 and in the intervening two years the UK and Scottish Governments will be working on the appropriate ways to deal with many of the tax and legislative matters.
It may be useful to look at one or two matters which may be concerning clients:
Banking – If you currently deposit your cash with a Scottish Bank, then this institution will remain a UK Bank until March 2016. So the Bank will continue to be subject to the same regulation and the investor’s compensation scheme will continue to operate, so your money will not be at risk and you will have plenty of time to move your account to the UK… The Bank of England will continue to provide liquidity to Scottish Banks. Currently these loans are collaterally backed by sterling. If sterling is n retained this may cause a problem.
Investments – If you hold investments operated by a Scottish based Provider then after March 2016 the funds could become unauthorised by the UK Regulator. However, it is our understanding that many large Scottish Institutions have established additional registered companies to operate within the UK so it is likely that such issues can be resolved by the transfer of business between the two companies as applicable
State Pension – If there is a Yes” vote then the Scottish Government will be responsible for paying a state pension to its citizens. I understand that this will cost the Scottish Treasury an additional £1.4bn
Occupational and Personal Pensions – if these schemes are operated by Scottish Provider there is the potential that such schemes could be regarded an international cross-border schemes. However, this is highly unlikely to happen because the legislation will need to be harmonised at least in an initial period to allow funds to move back into the UK and as previously mentioned the Providers will establish UK companies.
Mortgages – If you are currently borrowing money from a Scottish Bank or other Institution there will be a number of issues to concern you; one is currency and the other interest rates. If Scotland changes its currency to a Scottish pound or to the Euro then the Scottish Banks will have to change the currency of their lending from sterling to the new currency. I can only imagine that borrowers will be given plenty of warning to find alternative borrowing in sterling. This is hypothetical but if you retained your loan with the Scottish Bank in another currency then you have added a currency risk to your mortgage as well as the normal interest risk. It is likely that interest rates would be different in the UK and Scotland and this could at times be an advantage and at others a disadvantage. I can only reiterate that there is no need to worry or speculate about the matter at this moment.