Is it time to get out of Scotland?

The country's move towards independence could affect savers, writes Harvey Jones
If you don't live in Scotland you may find it hard to get worked up about the current election campaign for the Scottish Parliament.

But you may be a lot more involved than you thought. If you have a life, pensions or investment plan with, for example, Scottish Widows, Standard Life or Scottish Provident - and millions do throughout the UK - then you are.

And this means that any movement towards an independent Scotland could have a financial impact on you, even if you live in Sussex.

Reports have been bubbling up over fears that if Scotland one day follows the Scottish National Party into full independence, Scottish-based companies could find themselves struggling under a harsher tax regime than companies elsewhere in the UK.

Scottish Widows recently expressed concern over how independence might hit ordinary policy holders, while reports surfaced that Standard Life was planning a move to Newcastle.

Sniffing an opportunity, the Greater Peterborough Investment Agency launched a direct mail campaign aimed at persuading Scottish financial institutions to relocate there.

Full independence would take years and may never come at all, but many financial decisions are made for the long term. If you are taking out a 25-year endowment plan with a Scottish-based company, a different regulatory or taxation framework in Scotland could hit your policy.

For example, a higher level of corporation tax would be passed on to policy holders everywhere, making products expensive and uncompetitive.

So should you be keeping your financial interests clear of Scotland? Understandably, Scottish life companies are falling over themselves to deny there will be any problem. Alan Young, communications manager with Scottish Widows, insists the life companies will not suffer under a Scottish tax-raising regime. Full independence might pose "hypothetical" problems however.

"Scottish-based companies are concerned because they transact the vast majority of their business south of the border. If Scotland pulled out of the UK then selling life policies, pensions and investments could prove difficult across what would be national frontiers."

However, he says, plans to further erode trading barriers within the European Union would probably offset any problems. And he reassures policy holders that if independence ever happened, Scottish Widows would put their interests first.

"All the companies have said they will take whatever action is necessary to protect policy holders. If the vast majority are south of the border then they would be looked after."

Scottish companies remain deliberately vague about what action they would take, although the obvious step would be to set up a head office in England as a tax base, while retaining the bulk of the operation in Scotland.

"I don't see any circumstances in which we would relocate lock, stock and barrel to England," Mr Young says. So Peterborough may be disappointed after all.

Standard Life has been laughing off the press reports of its plans to move to Newcastle. However, Tom King, its head of corporate affairs, admits the company took legal advice over how to move its tax base if the rate of corporation tax rose in Scotland after independence. "This type of contingency planning is something any good company would do. We would want to make sure policy holders would not be affected, but we have no plans to move."

Alasdair Buchanan, marketing consultant with Scottish Life, says any tax changes may actually work in favour of the customer. There is a chance that the SNP would actually reduce corporation tax, as it is fond of citing Ireland as a small, competitive economy with tax benefits for companies.

"Financial services are very important to the Scottish economy and employ many people. I doubt the SNP want to damage them in any way," he says.

Marianne Cantley, head of marketing at Edinburgh Fund Managers, says increased globalisation and the greater mobility of international companies would make it relatively easy to escape unduly harsh tax regimes. "We are a global company operating throughout the world. Different countries have different tax regimes and we have the flexibility to cope with these," she says.