ICAS is calling for the UK and Scottish governments to work together to develop protection and solvency arrangements to ensure that there is no disruption to Scottish pensions if the referendum in 2014 results in Scotland gaining independence.

In a new report, Scotland's Pensions Future: What Pensions Arrangements Would Scotland Need? ICAS says the Scottish government needs to develop a 'robust plan' for Scotland's pensions future and warns that there will be 'significant pensions issues' for the rest of the UK arising from the independence debate.

ICAS says pension schemes operating between Scotland and the remainder of the UK would be classed as 'cross-border' under EU law if Scotland votes 'yes' and addressing any underfunding should become a priority.

The institute says EU solvency requirements would have major cost and cashflow implications for employers with cross-border defined benefit and hybrid schemes as pension liabilities would have to be fully funded at all times; underfunding would have to be rectified immediately rather than through a staged recovery plan; and annual actuarial evaluations would be necessary.

ICAS believes that a separate Scottish Pension Protection Fund would need to be established in the event of Scottish independence. While the government of any future independent Scotland would be likely to continue with existing UK arrangements for pension regulation in the early years of independence, agreement would need to be reached as to which government would be responsible for the state pension entitlements of Scots built up prior to independence.

Responsibility for the UK's public sector pension liabilities would also need to be established following a 'Yes' vote. ICAS says liabilities of £86bn have already been identified as relating to Scotland, including £60bn which are unfunded, but there are UK-wide public sector pension schemes where Scotland's share would need to be determined as part of Scotland's 'opening balance sheet'.

David Wood, ICAS executive director, technical policy, said: 'ICAS calls on the Scottish and UK governments to engage with business, the pensions industry and the EU to minimise the financial impact on these schemes, their sponsoring employers and the people who have paid into the schemes. Both governments have a duty to engage with citizens and other pensions stakeholders to prepare a way forward, in advance of the referendum, and agree transitional arrangements to be implemented in case of a "Yes" vote.'