Nov. 1 (Bloomberg) -- As Scotland’s nationalists dangle the prospect of a shorter working life than in England ahead of next year’s referendum on independence, demographers say the numbers behind their proposal don’t add up.
The semi-autonomous government in Edinburgh, run by First Minister Alex Salmond’s Scottish National Party, pledged to review U.K. plans to bring forward an increase in the state pension age to 67. The Institute and Faculty of Actuaries said in a report last week there was a danger of using the retirement age as a “populist tool” to postpone “difficult decisions.”
“Forcing people to work longer is not popular,” Robert Wright, an adviser on demographics to the U.K.’s Office for National Statistics, said in a phone interview. “Telling people that working longer won’t happen with independence is pure politics. Even for the believers it is not believable.”
Salmond and his party will set out their vision for an independent Scotland in a policy paper this month, with polls showing they need to convince at least all the undecided voters to stand a chance of prevailing.
While policies like free higher education and prescriptions set Scotland apart from the rest of the U.K., the proposal on pensions bucks a worldwide trend.
The U.K., Germany, the Netherlands, France, Ireland, Italy, Spain, the U.S. and Australia plan to lift the state pension age by at least two years over the next 10-15 years in a bid to curb rising costs as people live longer. In Scotland, the demographic focus should instead be on increasing the working population and contributions to tax revenue, the government said.
The number of people above state pension age will increase more slowly in Scotland by 2035 compared with the U.K. as a whole, by 26 percent instead of 28 percent, the Scottish government said in an e-mailed response to questions on Oct. 15 ahead of the SNP’s party conference.
“The reason we want an expert commission to look at the move to 67 is that average Scottish life expectancy is lower than the average U.K. life expectancy, so the number of years receiving state pension is lower in Scotland,” it said.
As well as the pensions review, Salmond told his party on Oct. 19 that an independent Scotland would give workers a higher minimum wage and cut energy bills. Other areas of the debate include keeping the pound, revenue from the North Sea oil industry and the division of debt. U.K. 10-year bonds yielded 2.61 percent today after topping 3 percent in September.
The Scottish government will unveil its proposals for how an independent Scotland would work on Nov. 26, less than 10 months before the vote on breaking away from the rest of the U.K. Support for independence is about 20 percentage points behind staying part of the 306-year-old union, according to TNS BMRB and YouGov Plc polls in the past month.
In the most recent test at the ballot box since trouncing the opposition Labour Party in May 2011 Scottish elections, the SNP lost a vote in Dunfermline last week as politicians scrambled to save a nearby petrochemicals plant from closure.
Voters aged between 35 and 59, who would benefit first from any deferral of the rise in state pension age, are most in favor of independence, a survey by YouGov last month showed. Polls by Ipsos Mori and TNS BMRB didn’t reflect that.
The U.K. spends less on retirement benefits as a proportion of its economy than most countries in the 28-member European Union, according to European Commission’s 2012 Ageing Report.
Other countries already carried out the kind of reassessment the Scottish government is proposing and concluded that the state pension age was lagging behind the increase in life expectancy, said Martin Potter, chairman of the Scottish board of the Institute and Faculty of Actuaries.
“It would be very surprising if the demographic progression in Scotland is very different from other European countries,” Potter said on Oct. 22. “They would have to find money from elsewhere or make savings.”
Jim Osborne, a former pension fund trustee at Allianz SE’s U.K. unit and a supporter of independence, meanwhile said he had his “doubts” that delaying a higher pension age is affordable.
The U.K. originally proposed lifting the age to 67 between 2034 and 2036. It now plans to accelerate that by eight years, in line with target dates in Germany and the U.S.
The Scottish government so far has committed to an increase to 66 due to take effect in 2020. The SNP would also guarantee, until at least 2021, to link an independent Scotland’s state pension payments with average earnings, inflation, or 2.5 percent, whichever is the higher.
The Scottish Parliament in Edinburgh, restarted in 1999 as the U.K. devolved power, has control over transportation, health, education and justice, while the government in London oversees the economy, defense, foreign policy and welfare including pensions. The SNP is campaigning to win full autonomy.
“If there is a potential, however small, to delay raising the age we should look at it,” said Rachel Holmes, a lecturer in accountancy and finance at Edinburgh Napier University. “Otherwise we are stuck with the U.K. perspective.”
Life expectancy for women in Scotland is 1.8 years lower than the U.K.’s and for men the gap is 2.5 years, according to the Scottish government’s Pensions in an Independent Scotland paper published last month. The proposals from the government in London failed to take into account that lower socio-economic groups had a shorter life expectancy, it said.
The divide is due more to a higher death rate among younger people, said Wright, a professor of economics at Strathclyde University. Once Scots reached the age of 65, the gap was little more than a year for both men and women, he said.
“Scotland seems to be doing the opposite of every other rich country with an aging population,” said Wright. “Raising the age of entitlement to the state pension is not the silver bullet for population aging. It is almost political suicide.”
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