Scots stand to lose out on their pension pots if they opt for independence in a vote this September a senior British minister warned on Friday.
Weighing in on the heated row over the fiscal and economic implications of an independent Scotland, Treasury Minister Danny Alexander warned a 'Yes' vote in the September referendum on independence posed a risk to the country's pensions.
Citing the safeguards the government currently provides through the Pension Protection Fund he said "members of defined benefit schemes here in Scotland would no longer be protected."
Alexander also warned that an independent Scotland posed a number of regulatory risks for the U.K.'s pensions system.
Highlighting the interconnectedness of the countries' pension systems Alexander warned "70 per cent of pension products bought by Scottish consumers in 2011-12 were from firms based in the rest of the UK and 91% of pensions sold by Scottish firms were to non-Scottish customers".
However, an independent Scotland would "break up the current domestic market and – in turn– detach Scotland from our single regulatory framework … [and] creating an international border would reduce financial firms' ability to spread risk … and drive up the costs of financial products – like pensions – for Scottish householders."
But Nicola Sturgeon, deputy first minister of Scotland's devolved government, contested Alexander's claims.
She told reporters Friday: "On the issue of pensions, it is Westminster that is threatening an ever-rising retirement age for the state pension, which we have pledged to review post-independence"
"An independent Scotland will be more able to afford pensions than the risk of the UK, and all pensions will be paid in full after independence."
(Read more: UK grants Scotland powers to issue its own bonds)
Bad for business?
Echoing statements for a number of British business leaders, Alexander also warned against the impact of independence on pension companies.
"Scotland has built a hugely successful pension and financial services sector here in Edinburgh" he said.
"But with a different regulatory system and a different currency and different pension protections many companies would have no choice but to relocate their businesses cutting jobs in Scotland and damaging our economy."
The stark warning ties in with the revelations of a number of companies' contingency plans in the event of Scotland's independence.
Investment firm Alliance Trust said in its annual statement on Friday it planned to set up registered companies in the UK ahead of the referendum on September 12.
(Read more: Scotland's Salmond: blocking pound will hurt UK)
"The referendum in September is creating uncertainty for our customers and our business, which we have a responsibility to address" Katherine Garrett-Cox, chief executive at Alliance Trust, said in a statement.
"Regardless of the outcome it is critical that we are able to provide continuity of service and protection of their investments and savings."
And earlier this week Scottish insurer Standard Life also revealed it too could shift business South of the border the event of Scotland's independence.
"We have started to establish registered companies to operate outside Scotland,into which we could transfer parts of our operations if it was necessary to do so," David Nish, CEO of Standard Life, said in a statement.
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