As part of the Scottish Independence debate the issues of regional life expectancy and the pensioner dependency ratio have become something of a political football. It is certainly difficult to remember points which have previously been regarded as niche topics which academics and politicians have become quite so exercised about. Having carried out some research, the first interesting fact is that Scottish mortality rates were not always higher than their counterparts in the rest of the UK (rUK). Up until the 1950’s, Scottish life expectancy was broadly on a par with the rest of the UK. However, from that point, rates in Scotland improved more slowly. Whilst there is no definitive explanation, the cause has generally been attributed to increased levels of deprivation until the 1980's.The deprivation of a region is measured by Carstair index, which essentially considers factors such as low social class, lack of car ownership, overcrowding and unemployment. The main reason for higher mortality rates from the 1980’s onwards is unknown but it is thought to relate to higher rates of alcohol and drug-related deaths, suicide, violence and cancer. In a report published by Glasgow Centre for Population Health entitled “Accounting for Scotland’s Excess Mortality” it suggests that the main factor for higher mortality rates can be explained due to regional variance of deprivation and mentions that geographical area with the greatest deprivation are the areas with the greater unexplained excess mortality rates. It also mentions the fact that higher mortality rates are seen in Glasgow (or West of Scotland) compared to rest of Scotland. The conclusions reached in this report are widely supported in a number of other research publications - Why is mortality higher in Scotland than in England and Wales?, Is the "Glasgow effect" of cigarette smoking explained by socio-economic status?and an article produced by Audit Scotland highlights the different health inequalities in different areas of Scotland. We’ve carried out some research based upon Scottish Parliamentary data by the 73 constituency areas using 2010 life expectancy assessments and we can see that a wide dispersion between regions remains. Aberdeen West leads the way with a combined life expectancy of 80.4, not far ahead of Eastwood in Glasgow at 80.2. Glasgow, Maryhill and Springburn fall at the other extreme with a life expectancy of 69.8 compared to an average of 75.8. Interestingly neighbouring Strathkelvin & Bearsden is towards the top at 78.7. ONS statistics in 2011 suggested average life expectancy in the UK (including Scotland) was 78.2 for males and 82.3 for females with the best region Kensington & Chelsea with male life expectancy at 85.1 and females at 87.8. Whilst this may be viewed as a negative issue for the Scottish population what it does highlight is that the scope for improvement in Scotland is more material than might be the case in the rest of the UK. So clearly the implementation of a successful health policy with resultant improvements in life expectancy would be likely to have negative impact on the Scottish pensions bill. In the recently published paper “Funding Pensions in Scotland: Would Independence Matter?” the authors tried to assess the impact of life expectancy on the pensions burden. The report assumes that the relative life expectancy gap is predicted to be roughly constant for the current population aged between 30 and 60 but predicted to narrow for those below 30. The report concludes that “the state pension in Scotland is both cheaper on an individual basis because of differential life expectancy and slightly less affordable on an aggregate basis because of the pensioner dependency ratio.” The pensioner dependency ratio (equal to the working age population divided by the pensioner age population) is a key measure of affordability of state and public sector pensions. It is acknowledged in the ‘Scotland’s Future’ Paper that this ratio is worse in Scotland than for the rest of the UK and likely to deteriorate more rapidly than in rUK. The issue of the Scottish pensioner dependency ratio is one which will have to be dealt with regardless of Scottish independence but independence could exacerbate an already difficult problem. Below is a table with figures extrapolated from the Office of National Statistics Paper referred to in the ‘Scotland’s Future’. The figures used in Scotland’s Future are for the UK as a whole so we have extracted the Scotland and rUK figures for comparison purposes. These figures are estimates and the further into the future the projections stretch the more subject they are to significant potential variations however they do provide helpful trends. The figures show that at 2010 the ratio of working age to pension age was broadly the same for Scotland and rUK (excluding Scotland) at about 3.1:1 based upon a Scottish population of about 5.2m. The figures also highlight that with such a small proportionate population changes in Scotland have a very limited impact on the pensioner dependency ratio for the UK as a whole. What this highlights is that there is likely to be no state pension cross subsidy from rUK to Scotland in the short term given the comparative pensioner dependency ratio and if Scotland’s lower life expectancy is factored in. This is consistent with the findings in “Funding Pensions in Scotland” however as can be seen from the figures this is unlikely to remain a constant over the next 10 years and beyond with the pensioner dependency ratio likely to become more material over time. By 2023 the rUK pensioner dependency ratio is at 3.14 compared to 3.02 for Scotland. This is as a result of a lower projected growth in working age population in Scotland at 4% compared to 12% in rUK and a significant increase in Scotland’s pensioner population. These rates continue to diverge until an expected pensioner peak in around 50 years whilst the population of working age has remained broadly static. So this means at that point there are only 2.4 working Scots paying for each pensioner compared to 3.1 currently. In simple terms if the state pension is around £7,500 per annum this would mean that currently each worker would pay around £2,420 of this via tax whereas they would in future be paying the equivalent of £3,125, an increase of £700 or approximately 30%. The ratio is equally expected to decline in rUK but not to the same extent. To keep pace with rUK ratio would require an increase in the Scottish working population over this period of around 5% (around 300,000 people) and even that is probably not enough to maintain the status quo on pensions with broadly an increase of around 1m people of working age required to maintain the ratio at the 3.15 level at which it currently stands. These increases would be in addition to a Scottish population already expected to grow from 5.2m in 2010, to 5.55m in 2023, to 5.77m in 2036 and 6.03m in 2066. Increases in retirement age, as proposed by the UK Government, should help to reduce the pensions bill and the lower life expectancy in Scotland might allow for the increase to be deferred in the very short term but this is unlikely to be sustainable for very long with longer term costs likely to be much higher overall in Scotland. Scotland’s Future comments that “The longer term target must be to grow our working age population in line with the projected increase in those dependent upon it.” This sensibly recognises that the only way to resolve this issue is to change the pensioner dependency ratio by attracting more people to come to (or return to) Scotland so that there are a greater number of people aged 16-65 to pay for the increasing numbers of pensioners. There are however a number of potential issues with this strategy. The required increases are just to match the ratios however this assumes that the population of working age increases to the required level but then chose to retire and take benefits elsewhere (i.e. not become pensioners). Is it clearly much more likely that many of these new workers will chose to retire in Scotland. This therefore further increases the number of workers required to match the ratio although this may be made up to some degree by the additional child population likely to be associated with the new working age population. Clearly such an approach is also likely to require a changed stance on immigration policy and it is uncertain what the additional impacts might be on wider social and economic policy. So whilst Scotland’s lower life expectancy may serve to reduce the burden of costs for state pensions in the short term the medium and longer term outlook appears much less favourable unless very significant additional worker population growth can be achieved and the associated implications effectively dealt with. Should the strategy prove unsuccessful then the result will undoubtedly be lower pensions or higher taxation costs to maintain pension levels.