Personal Finance

What happens to your cash if Scotland leaves the Union?

On Thursday the people of Scotland will go to the polls to decide whether or not to remain a part of the United Kingdom, but many questions have yet to be answered about what would happen economically if the Scots decide to go it alone. The papers have been trying to answer many of these questions.

Do I need to worry about my savings?

No is the short answer to this. If Scotland does vote for independence then everyone’s money held in a UK or a Scottish bank would still be protected until at least 16 March 2016 under the Financial Services Compensation Scheme. That gives Scotland time to set up its own compensation scheme and the banks and building societies time to restructure to reflect Scotland’s independence without you having to worry you might lose your savings.

What about ISAs?

The government hasn’t said for sure what would happen to Scottish people’s ISAs but The Telegraph has made an educated guess. “Under current rules – if Scottish savers were to be treated just like residents of any other foreign country – they would be able to keep existing ISA accounts, free of tax in the UK. But they would not be able to contribute further to an ISA,” says the paper.

Will my savings be switched into Euros?

If an independent Scotland decided to join the Euro it is likely they would follow the same process as other countries with the euro being legal tender alongside the old currency for a while, “giving savers and consumers time to adjust,” says The Telegraph.

What will happen to my mortgage?

Interest rates could be hit if Scotland votes for independence, says Sally Hamilton in the Mail on Sunday. The costs to the banks of adjusting “are likely to prompt a rise in interest rates north of the border, forcing up mortgage costs. Conversely, south of the border borrowers may benefit as the government holds off increasing the base rate to keep the economy stable.”

If Scotland adopts its own currency then Scottish homeowners could face the problem of having a mortgage in a foreign currency – the pound. This would mean the size of their debt would move with currency fluctuations.

Will pensions be affected?

Problems would arise if Scotland left the pound, says the Mail on Sunday. No one has yet addressed what would happen to pensions, but they could end up either being paid out in sterling leading to currency exchange costs, or devalued in the switch to a new currency.

What about investments?

The markets are already jittery as a result of investor uncertainty over Scotland. Bullionvault.com has reported a 42% increase in Scots buying gold as investors flock to safe havens. But, now is not the time to reassess your portfolio, according to The Times.

“A yes vote might produce a kneejerk short-term fall in the UK stock market, but if you have a diversified portfolio, just ride it out,” says David Budworth in The Times. Last week shares in Scottish companies took a hit, “yet all it took was an announcement that they would move their head offices to England if needed and the falls were reversed.” Most companies have a contingency plan and an independent Scotland is unlikely to cause any major long-term stock market falls.

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