Embarrassment for Alexander after EU signals pension rule changes

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Saturday, 08 March 2014 10:58

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  By Martin Kelly
 
UK Treasury Minister Danny Alexander has been left red-faced after it emerged EU regulations, which he claimed would lead to costly pension barriers in an independent Scotland, were set to be scrapped.
 
In a speech given by the UK Treasury minister on Friday, the Lib Dem MP said a Yes vote would lead to pension costs rising in an independent Scotland.

He said: “Creating an international border would reduce financial firms’ ability to spread risk and drive up the cost of financial products like pensions.”

The Lib DEm MP claimed existing EU rules would result in a newly independent Scotland having to set up a costly Pension Protection Fund and added: “In fact, if Scotland were part of the EU, they would have to set up such a Fund.”

However in a blow to Mr Alexander, it has emerged that days before he gave his speech the EU had already signalled its intention to remove cross-border barriers to operating pension plans across different EU member states.

This Spring the European Cimmission is expected to announce an overhaul of the EU’s Pensions Directive to remove the requirement that defined benefit pension plans must be ‘fully funded at all times’ if they operate in more than one EU Member State.  The change would remove one of the key planks in the arguments put forward by opponents of Scottish independence.

Commenting on Mr Alexander’s remarks on pensions, a spokesperson for Finance Secretary John Swinney accused the Lib Dem MP of having been caught making claims that he already knew were baseless.
 
“Danny Alexander has been caught red-handed. He has been making claims about pensions in full knowledge that the EU is on the point of resolving the issue of cross-border pensions.”, the spokesman said.
 
He added: “To scaremonger about people’s pensions is bad enough – to do it while knowing that the issue is being addressed and that the claims he is making have no substance is far, far worse.
 
“Mr Alexander has a track record of making claims and pledges which don’t stand up to scrutiny, and these latest comments show that people in Scotland can’t trust a word he says on the referendum.”
 
The claims from Mr Alexander follow similar accusations levelled by opponents of independence over the issue of pension provision in an independent Scotland.

Last year Better Together head Alistair Darling said the current state pension would be under threat in an independent Scotland.

He said: “Carrying this cost is a bigger problem for Scotland than for the rest of the UK because of the age structure of our population.  Within the union, however, that risk is pooled with the whole country, and will not have to be borne purely out of Scottish resources.

“That is something now accepted by both sides of the independence argument.   That’s a positive benefit of the union for Scotland.  Conversely separating from the union would diminish our long-term financial security.”

However the claim was blown apart when it emerged the UK’s Department for Work and Pensions (DWP) had already confirmed that UK pensions will continue to be paid in full to Scots, even if Scotland becomes independent.

The news was revealed by First Minister Alex Salmond last September after a constituent wrote to the DWP asking what would happen in the event of independence.

In an official reply, a DWP official wrote: “If Scotland does become independent, this will have no effect on your state pension – you will continue to receive it just as you do at present.”

Speaking during First Minister’s Questions at the time, Mr Salmond slammed what he said was opposition scaremongering over the pension arrangements of an independent Scotland.

“Given that the pensions service, the agency of the UK government, is sending to my constituents in Aberdeenshire such definitive information, it ill-behoves Labour and Tory scaremongerers who come to this chamber with a scaremongering agenda.”