Scottish Independence

I can't believe there is no discussion on this forum regarding Scottish Independence.

With the Institute and Faculty merging a few years ago, it seems that went against the separatist trend generally.

I am all for Scottish independence and haven't heard Actuaries say much of any worth to contribute to the debate.

In the event of a Yes vote, I wonder if it will make sense for the Profession to split back into Faculty and Institute? Since Scotland would have its own rules. Wouldn't there have to be a separate SA level exam? etc. etc.

Also what do you make of the stories claiming companies and jobs would leave Scotland? I suspect that's scaremongering but I wonder how it will all play out for Actuary jobs.

 

There's so much up in the air that there's little that can be meaningfully said at this stage. The basic facts are there for all to see; the interpretation is a matter of opinion.

It is unlikely that regulatory practice would diverge much in the short term, and there's a fair chance that if a currency union goes ahead, regulation will remain with London, so there wouldn't be an immediate need for demerger of the Institute & Faculty.

Certainly some companies will move. Sometimes for minor practical reasons, the kind that sees companies relocating all the time. Some moves will be for more systemic reasons - Standard Life & RBS will be examples of this. I can't see either of them being able to stay.

 

RBS and Standard Life talking of moving jobs to England if it is a YES vote.

I am not impressed at this on so many levels.

RBS is mostly owned by the British taxpayer after a huge bailout, so I'd question if it's appropriate for them to comment at all, given the poor judgement they've shown over the years.

Standard Life are highly arrogant, showing no loyalty to their Edinburgh staff.

If Scottish Corporation tax rates lower then they would change their tune, surely?

 

There was actually a talk a while ago by some actuaries in Scotland about the impact of the breakup from an actuarial perspective.
I for one really hope that it goes ahead just so there's something more interesting happening in the world.

 

Standard Life don't exactly endear themselves to actuarial job applicants by refusing to reimburse even a penny of travel and accommodation costs when candidates from England travel up for interviews (in the cases I know of).

 

According to the statement from RBS at http://www.rbs.com/news/2014/09/statement-in-response-to-press-speculation-on-re-domicile.html the bank has said it "believes that it would be necessary to re-domicile the Bank’s holding company and its primary rated operating entity (The Royal Bank of Scotland plc) to England." Furthermore, the BBC report at http://www.bbc.co.uk/news/business-29151798 states that: "In a letter to staff, the bank's chief executive said there was no intention to move operations or jobs."

 

... if you're moving HQ then how would jobs not be lost or move?! Someone's not being straight here (not suggesting you, td)

 

Indeed, there would undoubtedly have to be some changes, although possibly not that many. My point was though that this doesn't necessarily sound to me like RBS weighing in on either side of the debate. If anything, they're playing down the impact of a yes vote.

 

The bigger finance companies (such as RBS and Standard Life) who have most of their customers in England are certainly likely to relocate their registered offices there immediately if there's a yes vote, or they risk a run on their funds.

Whether or not they also move jobs will probably happen much more slowly and will depend on what happens with Scottish currency and EU membership. For example, if Scotland ends up with a non-sterling currency, then it wouldn't make much sense for Standard Life and RBS to keep many jobs up in Scotland since that would mean that the majority of their expenses would be in a different currency to their revenues, leading to a big exchange rate risk.

It's not a straightforward decision though. It costs more to hire people in London than it does in Edinburgh and you can't just easily find thousands of people in London to pick up all the work which was being done in Scotland (or convince all the Scots to move south with them), plus there would be lots of costs of redundancy, moving systems, finding new buildings, etc. Any change is likely to be protracted.

But either way, I think an independent Scotland would very quickly lose corporation tax from these companies, and then possibly income tax as any jobs are moved.

Some of the other aspects of independence are quite interesting from an actuarial point of view, such as Scotland having a lower life expectancy than the rest of the UK, which may make state pensions more affordable and could mean they could keep the retirement age lower. I imagine there would be plenty of work going for actuaries in the new Scottish financial regulators, too, if they wanted it.

 

That's really interesting, thanks.

 

You need to distinguish legal operation of a company from its daily management.

Lloyds Banking Group has its registered office in George Street in Edinburgh, but it is very definitely not headquartered in Scotland. That's something of a historic anomaly, but you get the point.

Regarding your point on corporation tax, that is only one consideration amongst many.

 

Was watching the bbc last night, was only touched on briefly, but I think no company would actually relocate to England until the UK EU membership referendum issue was settled...
I would suspect the answer to where would you locate your HQ:
a) A Scotland inside the EU or
b) An England exiting the EU
might be a different one.

 

Depends where their business sits. How much Euro-business does a Standard Life have? Even RBS has slimmed down.

 

Right, so that explains the 'brass plates' they were referring to.

 

The 'No' campaign are questioning the security of pensions paid in an independent Scotland.

Yet an ITV news report last night pointed out how in Glasgow the life expectancy is low.

So pensions would cost less in an independent Scotland.

Once again the scaremongering by the 'No' campaign is unfounded, in my humble opinion.

Why haven't we heard an IFoA spokesman set the record straight on pensions?

 

Any chance of a citation? Then we can look specifically at what's been said.

 

Remember, the affordability of state pensions is not just about how many pensioners you have (or how long they live). It's also about how many people you have of working age who are paying taxes. State pensions are paid for out of current taxes (there's no "pot" which money gets put into as you work and then taken out after you retire, like in a private pension), so if you have less taxpayers then pensions are less secure.

Scotland has a bigger ratio of pensioners to workers, that's what they mean when they say that pensions are less secure in Scotland. So yes, people may not live as long, but there could be less taxes coming in to pay them.

However, even though I agree that this is probably a bigger problem in Scotland than in the UK generally, the fact is that even UK state pensions are in trouble with or without scottish independence, since we have an ageing population. There are only 3 solutions, none of which are politically popular: raise taxes, reduce pensions, or bring in lots of young immigrants.

 

Sure but this is a problem everywhere. Young people will leave Scotland if the jobs aren't there. Millions have moved away over the years for this reason when Scotland run by UK.

 

... or people have more kids. A message that will be rejected by feminists.

 

It's a bigger problem in Scotland and brain drain would make it worse.

 

You can only blame the UK Govt for Scotland being in such an imbalance.