Wales Independence. Will the the State Pension be safe ?

One of the major concerns around Wales Independence. What will happen to the State Pension?

People are understandably uncertain, even fearful, when the income on which they depend, has always  been provided by the Westminster government.

How secure is their pension, when Wales goes Independent?

Will they get the same amount of pension under the new regime?

Overcoming these concerns is vital, not only to satisfy the pensioners, but for the progress of Independence.

Pensioners make up over one fifth of the Wales population and they are also the least enthusiastic sector for Welsh Independence.

So the State Pension in Independence.

Not only safe, but better.

In Wales, the State Pension is the responsibility of the UK government, as it is for all the UK nations

The pension is paid to all eligible citizens, eligible by having paid a requisite number of National Insurance contributions to the UK government..

This remains the case after Independence.

It has been argued that historically these contributions have not been paid into a pension pot, rather, State Pension is paid from current taxes.

Therefore, the argument goes, the UK responsibility ends on Independence.

This argument ignores two important facts.

Although it is the case that N I contributions were not paid into a pension pot, there can be no doubt that they made a significant gain to the UK finances

Gain that did not necessarily proportionally benefit Wales .

The second  reason and most compelling is that the UK government accepts responsibility for UK citizens that have chosen to live in other countries.

They total approximately 1.2 million, that's twice as many as the pensioners in Wales.

It would therefore be illogical and almost certainly illegal in not having the same responsibility for pensioners who choose to live in an Independent Wales.

So on the one hand an Independent Wales and on the other a Westminster government responsible for the pensioners of that nation.

How to resolve it?

Although not inevitable, it would clearly be unreasonable that such an arrangement could continue infinitely. Especially as the citizens of an Independent Wales would now be paying their NI contributions to their new nation.

It would seem reasonable that new pensioners eligible to receive the State Pension after the date of Independence, would become the responsibility of the Wales government

An exception to this would be pensioners migrating to Wales from other parts of the UK after Independence. Their pensions and indeed health and social care needs will remain the responsibility of the UK government.

Which leaves the existing pensioners living in Wales at the start of Independence.

The sensible course here would seem for the UK government to compensate the Welsh government to take over the financial and legal responsibilities for the State Pension relating to pensioners living in Wales. This is a significant liability for the UK government and therefore a significant compensation.

The UK Treasury estimates the transition, with new pensioners becoming eligible and older pensioners dying, to be 5% per year, taking into account ageing data and mortality rates. Which means that it would take 20 years of continuing UK payment, albeit reducing proportionally each year.

The present cost of State Pension in Wales is £6 billion per year. So reducing at 5% per year for 20 years would amount to almost £30 billion.

That therefore is the compensation Wales would expect from the UK government.

Attractive to the UK,  as they would be relieved of 20 years of administrative costs and that Wales would be responsible for future annual increases.

It would also be beneficial to Wales having an injection of capital and being relieved of the costs of State Pension in the nation's formative years.

No worries on the security of the pension then!

As for whether it will be improved, a detailed explanation for that is beyond this simple piece. It is dealt with however in other posts regarding the Welsh economy.

Suffice to say that the prime aim of Independence is improving the welfare of the Welsh people. The UK State pension is among the worse in Europe, so Wales would regard the State Pension as a priority.

It would seek, not only to increase it, but to improve it in line with the more progressive national schemes.

The State Pension, in line with all other public service and welfare, will depend on the economy of an Independent Wales, so no worries there.  It's going to be an improvement on any alternative within a failing UK.

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