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Yes vote pension cost warning

PENSION costs in an independent Scotland would rise fivefold within 20 years because of an ageing population and the SNP Government's spending commitments, according to a new analysis paper.

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The document running into 116 pages is the 13th in the UK Government's series on the projected consequences of independence.

It also says:

l an independent Scotland would have an estimated public service pensions liability of £100 billion;

l one-off IT costs to establish a new social security system would be around £350 million on top of the current £720m annual running costs;

l any sharing of systems for a transitional period following a Yes vote, as mooted by the SNP Government, would mean it "would not be able to make changes to existing social security policy or processes or to opt out of Great Britain-wide reforms"; these include the so-called bedroom tax;

l if the SNP Government dropped the UK plan to increase the state pension age to 67, it would cost £15bn between 2026 and 2036 because of extra state funding and lost income.

But Nicola Sturgeon, the Deputy First Minister, hit back, condemning what she called the Coalition's hypocrisy for "scaremongering on welfare and pensions" in an independent Scotland as it made £6bn cuts to welfare in Scotland.

And she branded Iain Duncan Smith, the Work and Pensions Secretary, "feart" for not coming to Scotland to launch the paper and instead "using Alistair Carmichael as a human shield".

The Scottish Secretary will be in Fife today to promote the document.

It explains that at present spending on pension benefits in Scotland costs almost £80 more per working-age person per year than across the UK as a whole.

Scotland's population, which is described as ageing faster than other parts of Britain, means over the next 20 years this figure is due to rise to almost £200 extra.

But, the report claims, when the Scottish Government's proposals such as introducing a new single tier pension of £160 per week, keeping the Savings Credit element of Pension Credit and "delaying" the planned UK state pension increase to 67, are taken into account, then this, in today's terms, more than doubles to £410. It grows even more when further social security costs are added.

The analysis paper states: "Taken together, a combination of demographic changes and spending commitments means spending rising to nearly £1.55bn more per year over the next 20 years in today's terms, than if spending per working-age person was at average UK levels.

"This results in a total increased cost of around £450 per working-age person per year in Scotland over the next 20 years."

It adds: "These are massive spending commitments by any standards.

"Such expenditure would normally require increases in taxes, cuts in pension/benefit payments, significant reductions in other areas of expenditure or the need to be absorbed into a budget deficit."

The UK Government stresses that rising pension costs are "better absorbed by the bigger, more diverse UK economy - with more taxpayers and less reliance on oil revenues - than an independent Scotland".

Mr Duncan Smith stressed how as part of the UK, Scots benefited from "this resilient and unified system", which delivered the same support everywhere irrespective of peaks and troughs in economies of the nations or demographic differences.

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