Notes to the financial statements
NOTES TO THE FINANCIAL STATEMENTS
|
1. TUITION FEES AND EDUCATION CONTRACTS(consolidated and university) |
2018/19 | 2017/18 |
|---|---|---|
|
Scottish higher education students |
5,858 | 5,892 |
| Rest of UK students | 1,040 | 1,221 |
| European Union (excluding UK) students | 2,585 | 2,111 |
| Non-European Union students | 2,582 | 2,232 |
| Other fees and discounts | (337) | (301) |
| Education contracts | 2,195 | 1,756 |
| Total | 13,923 | 12,911 |
|
2. SCOTTISH FUNDING COUNCIL GRANTS(consolidated and university) |
2018/19 | 2017/18 |
|
Recurrent grant |
||
| Teaching | 12,558 | 12,080 |
| Research |
1,174 |
1,109 |
|
Specific grants |
||
| Wider access retention premium | 597 | 586 |
| Regional Coherence - Academies programme | 219 | 81 |
| Disabled students premium | 54 | 54 |
| Knowledge exchange / University Innovation Fund | 534 | 350 |
| Scottish Drama Training Network | 148 | 148 |
| Capital maintenance grant released | 359 | 297 |
| Other miscellaneous grants | - | 133 |
|
Deferred capital grants released (note16) |
||
|
Land & buildings |
528 |
588 |
|
Equipment |
- | - |
| Total |
16,171 |
15,426 |
|
3. RESEARCH GRANTS & CONTRACTS |
Consolidated 2018/19 £000 |
Consolidated 2017/18 £000 |
University 2018/19 £000 |
University 2017/18 £000 |
|---|---|---|---|---|
|
Research councils |
239 | 271 | 239 | 271 |
| UK based charities | 132 | 212 | 124 | 202 |
|
UK government and health authorities |
1,497 | 1,270 | 1,484 | 1,256 |
| UK private sector |
7 |
20 | - | 7 |
| European funding |
81 |
- | 81 | - |
| Other grants & contracts |
236 |
181 | 239 | 181 |
| Total |
2,192 |
1,954 | 2,167 | 1,917 |
|
4. OTHER OPERATING INCOME |
Consolidated 2018/19 £000 |
Consolidated 2017/18 £000 |
University 2018/19 £000 |
University 2017/18 £000 |
|---|---|---|---|---|
|
Residences, catering and conferences |
5,250 | 5,033 | 4,884 | 4,784 |
|
Other services rendered |
829 | 611 | 469 | 397 |
|
Sports centre income |
223 | 234 | 223 | 234 |
|
Other income |
540 | 599 | 887 | 843 |
|
Total |
6,842 | 6,477 | 6,463 | 6,258 |
|
5. INVESTMENT INCOME |
Consolidated 2018/19 £000 |
Consolidated 2017/18 £000 |
University 2018/19 £000 |
University 2017/18 £000 |
|---|---|---|---|---|
|
Investment income on endowments |
- |
- |
- |
- |
|
Other investment income |
85 |
27 |
84 |
26 |
|
Net return on pension scheme |
- | - | - | - |
| Total |
85 |
27 | 84 | 26 |
|
6. DONATIONS AND ENDOWMENTS(consolidated and university) |
2018/19 |
2017/18 |
|---|---|---|
|
£000 |
£000 | |
|
New endowments |
- | - |
|
Unrestricted donations |
305 |
239 |
| Total |
305 |
239 |
|
7. STAFF COSTS |
Consolidated 2018/19 £000 |
Consolidated 2017/18 £000 |
University 2018/19 £000 |
University 2017/18 £000 |
|---|---|---|---|---|
|
Wages and salaries |
17,855 | 18,046 | 17,710 | 17,925 |
|
Restructuring |
1,101 | - | 1,101 | - |
|
Social security costs |
1,923 | 1,799 | 1,923 | 1,795 |
|
Movement on USS provision |
698 |
3 | 698 | 3 |
|
Other pension costs |
5,135 |
4,193 |
5,135 |
4,190 |
| Total | 26,712 | 24,041 | 26,567 | 23,913 |
|
Emoluments of the Principal and Vice-Chancellor (who was also the highest paid Member of the University Court) |
2018/19 £000 |
2017/18 £000 |
|---|---|---|
|
Professor Petra Wend |
||
|
Salary |
215 |
210 |
|
Employers’ pension contributions |
- |
- |
|
In lieu of employers’ pension contribution |
32 | 32 |
|
Benefits in kind |
2 | 2 |
|
Total |
249 |
244 |
There are no pension contributions for Professor Wend. The Principal opted out of the pension scheme in the previous year. Additional payments equivalent to pensions contributions foregone are included within emoluments. The head of the University’s basic salary is 5.27 times the median pay of staff, where the median pay is calculated on a full-time equivalent basis for the salaries paid by the University to its staff.
Key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the University: this comprises the Executive Board. The total compensation for the year ended 31 July 2019 (including any employers’ pension contributions) was £937,778 (year ended 31 July 2018, £915,390).
University Court members
The University Court members are the trustees for charitable law purposes and are also the directors of the company limited by guarantee for company law purposes. Due to the nature of the University’s operations and the composition of the University Court (being drawn from local public and private sector organisations), it is inevitable that transactions will take place with organisations in which a member of the University Court may have an interest. All transactions involving organisations in which a member of the University Court may have an interest are conducted at arm’s length, and in accordance with the University’s financial regulations and normal procurement procedures. University Court members receive no remuneration in respect of their duties as members of the University Court. A number of members of the University Court, including the Principal and Vice-Chancellor, receive a salary in respect of their employment with the University. Detail of such remuneration is set out below.
| University Court members |
2018/19 £000 |
Re stated 2017/18 £000 |
|---|---|---|
| Directors’ emoluments (including pension contributions) |
||
| Fees for services as members of University Court | - | - |
| Emoluments (i.e. salaries as members of staff) | 568 | 558 |
| Contributions paid to pension schemes | 57 | 56 |
| Benefits in kind | 5 | 4 |
| 630 | 618 |
These figures relate to 7 members of staff (2017/18: 7 as restated), including the Principal.
The number of members of staff, including the Principal, who received remuneration (including benefits and excluding pension
contributions) in the following range was:-
| Members |
2018/19 Numbers |
2017/18 Number |
|---|---|---|
| Senior postholders | ||
| £100,001 to £110,000 | 2 | 1 |
| £110,001 to £120,000 | 1 | 1 |
| £240,001 to £250,000 | 1 | 1 |
| 2018/19 | 2017/18 | |
| £000 | £000 | |
| Compensation for loss of office | ||
| Compensation payable in respect of senior post holders | - | - |
| Members |
2018/19 FTE number |
2017/18 FTE number |
|---|---|---|
| Average full time equivalent staff numbers by major category: (consolidated and university) |
||
| Academic schools | 194 | 195 |
| Academic services | 43 | 48 |
| Research grants & contracts | 33 | 36 |
| Residences, catering & conferences | 26 | 26 |
| Premises | 21 | 23 |
| Administration & central services | 108 | 113 |
| 425 | 441 |
8. INTEREST PAYABLE AND OTHER FINANCE COSTS
| INTEREST PAYABLE AND OTHER FINANCE COSTS |
Consolidated 2018/19 £000 |
Consolidated 2017/18 £000 |
University 2018/19 £000 |
University 2017/18 £000 |
|---|---|---|---|---|
| Loan interest | 1,246 | 1,303 | 1,246 | 1,303 |
| Finance lease interest | - | - | - | - |
| Net charge on pension scheme | 186 | 338 | 186 | 338 |
| 1,432 | 1,641 | 1,432 | 1,641 |
9. ANALYSIS OF TOTAL EXPENDITURE BY ACTIVITY
| ANALYSIS OF TOTAL EXPENDITURE BY ACTIVITY |
Consolidated 2018/19 £000 |
Consolidated 2017/18 £000 |
University 2018/19 £000 |
University 2017/18 £000 |
|---|---|---|---|---|
| Academic schools | 14,197 | 13,579 | 14,197 | 13,579 |
| Academic services | 5,177 | 5,162 | 5,177 | 5,162 |
| Research grants & contracts | 1,900 | 1,712 | 1,884 | 1,672 |
| Other services rendered | 508 | 464 | 236 | 307 |
| Residences, catering and conferences | 3,110 | 2,961 | 3,002 | 2,904 |
| Premises | 8,096 | 7,574 | 8,096 | 7,574 |
| Administration & central services | 7,845 | 8,457 | 7,836 | 8,454 |
| Other expenses | 4,729 | 2,498 | 4,729 | 2,498 |
| Total per income and expenditure account | 45,562 | 42,407 | 45,157 | 42,150 |
10. TAXATION (consolidated and university)
| TAXATION (consolidated and university) |
2018/19 £000 |
2017/18 £000 |
|---|---|---|
| UK Corporation Tax payable | - | - |
11. OTHER OPERATING EXPENSES
| OTHER OPERATING EXPENSES |
Consolidated 2018/19 £000 |
Consolidated 2017/18 £000 |
University 2018/19 £000 |
University 2017/18 £000 |
|---|---|---|---|---|
| External auditors – audit fees | 71 | 50 | 66 | 47 |
| External auditors – non-audit fees | - | 48 | - | 48 |
| Internal audit | 44 | 27 | 44 | 27 |
| Grants to ɬ Students Union | 240 | 240 | 240 | 240 |
| Other expenses | 11,328 | 11,185 | 11,073 | 11,059 |
| 11,683 | 11,550 | 11.423 | 11,421 |
12. TANGIBLE ASSETS
Consolidated and University
| TANGIBLE ASSETS |
Freehold land & buildings Owned £000 |
Fixtures, fittings & equipment Owned £000 |
Fixtures, fittings & equipment Held under finance leases £000 |
TOTAL £000 |
|---|---|---|---|---|
| Cost or valuation: | ||||
| At 1 August 2018 | 107,486 | 9,841 | 1,271 | 118,598 |
| Disposals at cost | - | (1,148) | - | (1,148) |
| Additions at cost | - | 1,011 | - | 1,011 |
| Revaluation of buildings | 22,421 | - | - | 22,421 |
| At 31 July 2019 | 129,907 | 9,704 | 1,271 | 140,882 |
| Depreciation: | ||||
| At 1 August 2018 | 6,705 | 8,578 | 1,244 | 16,527 |
| Written off on disposals | - | (1,148) | - | (1,148) |
| Written back due to revaluation | (8,193) | - | - | (8,193) |
| Provided during the year | 4,950 | 758 | 27 | 5,735 |
| At 31 July 2019 | 3,462 | 8,188 | 1,271 | 12,921 |
| Net book amount at 31 July 2019 | 126,445 | 1,516 | - | 127,961 |
| Net book amount at 1 August 2018 | 100,781 | 1,263 | 27 | 102,701 |
| Analysis of net book amount at 31 July 2019 |
||||
| Financed by capital grant | 8,207 | - | - | 8,207 |
| Other | 118,238 | 1,516 | - | 119,754 |
| 126,445 | 1,516 | - | 127,961 |
The valuation of the academic estate was carried out at 31 July 2018 by Gerald Eve, Chartered Surveyors. The basis of the valuation, which was carried out in accordance with guidelines issued by the Royal Institution of Chartered Surveyors, is depreciated replacement cost. Having reviewed the relevant indices, management has concluded that no revision is required to the valuation included in the financial statements as at 31 July 2019. The student accommodation was valued as at 31 July 2019, also by Gerald Eve LLP. This valuation was prepared in accordance with the requirements of the RICS Valuation - Global Standards (July 2017 edition) and Financial Reporting Standard 102 and the 2019 Statement of Recommended Practice ‘Accounting for Further and Higher Education’. The valuation was undertaken on a Fair Value basis, equated to Market Value on the assumption of a continuation of the existing use.
Barclays Bank plc holds a standard security, dated 17 December 2014, over the student accommodation situated on the University campus.
The University has a modest collection of works of art and other items of historical interest. No value is included within fixed assets in respect of this collection as it is not considered to be material.
13. INVESTMENTS
Subsidiary Undertaking
| Name of undertaking | Country of incorporation and registration |
Description of shares held | Proportion of nominal value of shares held (%) |
Cost at 1 August 2018 and 31 July 2019 (£) |
|---|---|---|---|---|
| ɬ Enterprises Ltd | Scotland | Ordinary £1 shares | 100 | 100 |
| 100 |
ɬ Enterprises Limited undertakes activities which, for legal or commercial reasons, are more appropriately channelled through a separate limited company. These activities include vacation letting, conferences and rendering of services (other than research) for a variety of commercial and other organisations. The results of ɬ Enterprises Limited have been consolidated into the group financial statements.
14. TRADE AND OTHER RECEIVABLES
| TRADE AND OTHER RECEIVABLES |
Consolidated 2019 £000 |
Consolidated 2018 £000 |
University 2019 £000 |
University 2018 £000 |
|---|---|---|---|---|
| Amounts falling due within one year: | ||||
| Trade debtors | 858 | 1,040 | 677 | 905 |
| Prepayments and accrued income | 851 | 671 | 784 | 671 |
| Amounts due from subsidiaries | - | - | 364 | 406 |
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
| CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
Consolidated 2019 £000 |
Consolidated 2018 £000 |
University 2019 £000 |
University 2018 £000 |
|---|---|---|---|---|
| Secured loans (see note 16) | 1,492 | 32,070 | 1,492 | 32,070 |
| Trade creditors | 1,886 | 2,070 | 1,885 | 2,015 |
| Social security and other taxation payable | 568 | 552 | 568 | 512 |
| Accruals and deferred income | 4,238 | 3,546 | 4,027 | 3,422 |
| Unsecured loans | 35 | 35 | 35 | 35 |
| Finance lease commitments due within one year | - | - | - | - |
| Total | 8,219 | 38,273 | 8,007 | 38,054 |
The secured long-term loan facility with Barclays Bank plc is £30.6 million, and has a final maturity date of 17 December 2024. The loan is secured over part of the campus site at Musselburgh. The University has entered into a fixed-rate arrangement in order to protect itself against any significant fluctuations in interest rates. The terms of this arrangement are commercially confidential. At 31 July 2018, as a result of an anticipated covenant breach, which was subsequently waived by Barclays Bank plc, the full amount of the outstanding loan was included within Creditors: amounts falling due within one year in line with FRS 102.
16. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
| CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
Consolidated & University 2019 £000 |
Consolidated & University 2018 £000 |
|---|---|---|
| Secured loans (see note 15) | 29,086 | - |
| Unsecured loans | 125 | 154 |
| Deferred capital grants | 8,207 | 8,735 |
| 37,418 | 8,889 | |
| Analysis of secured loans:- | ||
| Due between one and two years | 1,492 | - |
| Due between two and five years | 4,475 | - |
| Due in five years or more | 23,119 | - |
| Total due after more than one year | 29,086 | - |
| Due within one year (note 15) | 1,492 | 32,070 |
| Total secured loans | 30,578 | 32,070 |
| Analysis of unsecured loans:- | ||
| Due between one and two years | 35 | 35 |
| Due between two and five years | 90 | 86 |
| Due in five years or more | - | 33 |
| Total due after more than one year | 125 | 154 |
| Due within one year (note 15) | 35 | 35 |
| Total unsecured loans | 160 | 189 |
Analysis of deferred capital grants
| Analysis of deferred capital grants |
Consolidated & University 2019 £000 |
Consolidated & University 2018 £000 |
|---|---|---|
| Opening balance : buildings | 8,735 | 9,323 |
| Opening balance : equipment | - | - |
| 8,735 | 9,323 | |
| Receivable : buildings | - | - |
| Receivable : equipment | - | - |
| Release : buildings | 528 | 588 |
| Release : equipment | - | - |
| 528 | 588 | |
| Closing balance : buildings | 8,207 | 8,735 |
| Closing balance : equipment | - | - |
| 8,207 | 8,735 |
17. PROVISIONS FOR LIABILITIES
|
Consolidated and University Pensions £000 |
Obligation to fund deficit on £000 |
Pension enhancements £000 |
Defined Benefit Obligations £000 |
Total Pensions Provisions £000 |
|---|---|---|---|---|
| At 1 August 2018 | 372 | 3,021 | 5,823 | 9,216 |
| Utilised in year | (21) | (227) | - | (248) |
| Transfer (to)/from income & expenditure account | 729 | 217 | 9,502 | 10,448 |
| At 31 July 2019 | 1,080 | 3,011 | 15,325 | 19,416 |
The University has a liability to fund the past deficit on the Universities Superannuation Scheme (USS). This obligation arises from the contractual obligation with the pension scheme for total payments relating to benefits arising from past performance. The University has assessed future staff levels within the USS scheme and salary inflation over the period of the contractual obligation in assessing the value of this provision. Further information is provided in note 20(C). Since the year end, following the completion of the 2018 actuarial valuation, a new deficit recovery plan has been agreed, of which more details are given in note 20(C). As at 31 July 2019 and assuming all other assumptions used to calculate the provision remain unchanged, this would have resulted in a revised provision of £0.593 million, a decrease of £0.486 million from the current year end provision.
The University also has a liability for pension enhancements payable to former members of staff who have taken early retirement in prior years. An actuarial valuation of the amount of this liability was carried out by Hymans Robertson, Actuaries, at 31 July 2019, on the basis of valuation prescribed by FRS 102, and using the same set of assumptions as are set out in note 20 in relation to the valuation of the Local Government Pension Scheme.
Detail of the movement in the Local Government Pension Scheme (LGPS) provision is set out in note 20(A).
18. ENDOWMENT RESERVES
|
ENDOWMENT RESERVES Consolidated and University Unrestricted |
Consolidated and University Restricted Expendable £000 |
Consolidated and University Restricted Permanent £000 |
Restricted Total £000 |
Total £000 |
|---|---|---|---|---|
| Balance at 1 August 2018 | - | 518 | 47 | 565 |
| Income for year | - | 305 | - | 305 |
| Expenditure for year | - | (228) | - | (228) |
| At 31 July 2019 | - | 595 | 47 | 642 |
| Represented by: | ||||
| Capital value | - | - | 35 | 35 |
| Accumulated income | - | 595 | 12 | 607 |
| - | 595 | 47 | 642 |
19. REVALUATION RESERVE
| REVALUATION RESERVE |
Consolidated and University 2019 £000 |
Consolidated and University 2018 £000 |
|---|---|---|
| At 1 August | 31,132 | 31,132 |
| Revaluation Gains | 30,614 | - |
| Release to general reserve | (334) | - |
| At 31 July | 61,412 | 31,132 |
20. PENSIONS AND SIMILAR OBLIGATIONS
The University’s employees belong to three principal pension schemes, the Scottish Teachers Superannuation Scheme (STSS), the Local Government Pension Scheme (LGPS) and the Universities Superannuation Scheme (USS). The total pension cost for the year was £5,833,000 (2017/18: £4,196,000).
| PENSIONS AND SIMILAR OBLIGATIONS |
Consolidated and University Year ended 31 July 2019 |
Consolidated and University Year ended 31 July 2018 |
|---|---|---|
| The total pension charge is analysed as follows:- | £000 | £000 |
| Lothian Pension Fund (LGPS) | 3,211 | 2,493 |
| Scottish Teachers Superannuation Scheme | 1,642 | 1,437 |
| Universities Superannuation Scheme | 980 | 266 |
| 5,833 | 4,196 |
Estimated employers’ pension contributions for the year to 31 July 2020 are £3,615,000.
A ) Local Government Pension Scheme (LGPS)
The Lothian Pension Fund is a funded multi-employer defined benefit scheme, with the assets held in a separate trustee-administered fund to meet long-term pension liabilities to past and present employees. The trustees of the fund are required to act in the best interests of the fund’s beneficiaries. The appointment of trustees to the fund is determined by the scheme’s trust documentation. The trustees are responsible for setting the investment strategy for the scheme after consultation with professional advisors.
The following information is based upon a full actuarial valuation of the fund at 31 March 2017 updated to 31 July 2019 by a qualified independent actuary, Hymans Robertson LLP.
| Assumptions at | 31 July 2019 | 31 July 2018 | 31 July 2017 |
|---|---|---|---|
| Pension increase rate | 2.4% | 2.4% | 2.5% |
| Salary increase rate | 4.1% | 4.1% | 4.5% |
| Discount rate | 2.1% | 2.8% | 2.7% |
The fund is valued every three years by professionally qualified independent actuaries using the projected unit credit method, the rates of contribution payable being determined by the trustees on the advice of the actuaries. In the intervening years, the scheme actuary reviews the progress of the scheme. The actuary has indicated that the resources of the scheme are likely, in the normal course of events, to be sufficient to meet the liabilities as they fall due at the level specified by the scheme regulations.
The currently agreed employer’s contribution rate for the University is 19.5%. This is due to increase to 20.0% from 1 April 2020.
20. PENSIONS AND SIMILAR OBLIGATIONS (continued)
A ) Local Government Pension Scheme (LGPS) (continued)
The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescales covered, may not necessarily be borne out in practice. The current mortality assumptions, which are consistent with those used for the latest formal funding valuation, include sufficient allowance for future improvements in mortality rates. The assumed life expectations on retirement at age 65 are:-
| Members |
31 July 2019 No. of years |
31 July 2018 No. of years |
|---|---|---|
| Current pensioners | ||
| Males | 21.7 | 21.7 |
| Females | 24.3 | 24.3 |
| Future pensioners | ||
| Males | 24.7 | 24.7 |
| Females | 27.5 | 27.5 |
Analysis of the amount shown in the balance sheet
| Members |
Value at 31 July 2019 £000 |
Value at 31 July 2018 £000 |
Value at 31 July 2017 £000 |
Value at 31 July 2016 £000 |
Value at 31 July 2015 £000 |
|---|---|---|---|---|---|
| Estimated employer assets (A) | 63,223 | 57,343 | 57,322 | 50,644 | 40,901 |
| Present value of scheme liabilities | (77,851) | (62,495) | (68,492) | (63,303) | (50,918) |
| Present value of unfunded liabilities | (697) | (671) | (701) | (769) | (804) |
| Total value of liabilities (B) | (78,548) | (63,166) | (69,193) | (64,072) | (51,722) |
| Net pension liability (A) – (B) | (15,325) | (5,823) | (11,871) | (13,428) | (10,821) |
Analysis of movements in the present value of the scheme liabilities
| scheme liabilities |
31 July 2019 £000 |
31 July 2018 £000 |
|---|---|---|
| Opening defined benefit obligation | 63,166 | 69,193 |
| Current service cost | 2,276 | 2,580 |
| Interest cost | 1,789 | 1,891 |
| Contributions by members | 437 | 424 |
| Actuarial losses | 11,019 | (9,683) |
| Past service costs | 1,074 | - |
| Unfunded benefits paid | (49) | (48) |
| Benefits paid | (1,164) | (1,191) |
| Closing defined benefit obligation | 78,548 | 63,166 |
Analysis of movement in the market value of the scheme assets
| scheme assets |
31 July 2019 £000 |
31 July 2018 £000 |
|---|---|---|
| Opening fair value of employer assets | 57,343 | 57,322 |
| Expected return on assets | 3,660 | (2,006) |
| Contributions by members | 437 | 424 |
| Contributions by employer | 1,334 | 1,241 |
| Contributions in respect of unfunded benefits | 49 | 48 |
| Actuarial (losses)/gains | 1,613 | 1,553 |
| Unfunded benefits paid | (49) | (48) |
| Benefits paid | (1,164) | (1,191) |
| Closing fair value of employer assets | 63,223 | 57,343 |
20. PENSIONS AND SIMILAR OBLIGATIONS (continued)
A ) Local Government Pension Scheme (LGPS) (continued)
Guaranteed minimum pension (GMP) was accrued by members of the Local Government Pension Scheme (LGPS) between 6 April 1978 and 5 April 1997. The value of GMP is inherently unequal between males and females for a number of reasons, including a higher retirement age for men and GMP accruing at a faster rate for women. However overall equality of benefits was achieved for public service schemes through the interaction between scheme pensions and the Second State Pension.
The introduction of the new Single State Pension in April 2016 disrupted this arrangement and brought uncertainty over the ongoing indexation of GMPs, which could lead to inequalities between men and women’s benefits. As an interim solution to avoid this problem, GMP rules were changed so that the responsibility for ensuring GMPs kept pace with inflation passed in full to pension schemes themselves for members reaching state pension age between 6 April 2016 and 5 April 2021. This new responsibility leads to increased costs for schemes (including the LGPS) and hence scheme employers. The fund’s actuary has carried out calculations in order to estimate the impact that the GMP indexation changes will have on the liabilities of ɬ for financial reporting purposes. The estimate assumes that the permanent solution eventually agreed will be equivalent in cost to extending the interim solution to all members reaching state pension age from 6 April 2016 onwards.
The estimate as it applies to ɬ is that total liabilities could be 0.23% higher as at 31 July 2019, an increase of approximately £174,000. This increased liability has been reflected in the revised accounting report as a past service cost. These numbers are approximate estimates based on employer data as at 31 March 2017 and will be revised at the upcoming valuation.
B ) Scottish Teachers’ Superannuation Scheme (STSS)
The STSS is an unfunded multi-employer defined benefit scheme. The Scheme is financed by contributions from employers and current members of the Scheme. The contributions paid to the Scheme fall into general government revenues. There is no actual fund of assets but an account is maintained of a notional fund made up of contributions paid by employers and members, supplemented by a return on the notional fund at a pre-determined rate and reduced by benefits as and when they are paid to retired and former members of the Scheme. The University is unable to identify its share of the underlying assets and liabilities of the scheme. Accordingly, the University has accounted for its contributions as if it were a defined contribution scheme. The University has no obligation for other employers’ obligations to the multi-employer scheme.
The last full actuarial and funding valuation of the scheme was carried out at 31 March 2016. This valuation used the Projected Unit Methodology, and was carried out in accordance with the Public Service Pensions (Valuations and Employer Cost Cap) Directions 2014 (as amended). As a result of this valuation, the employer contribution rate has increased from 17.2% to 23.0% with effect from 1 September 2019. Employee contributions are dependent upon the member’s salary bracket. The notional fund at 31 March 2016 amounted to £21.5 billion, and total scheme liabilities for service amounted to £22.8 billion, giving a notional past service deficit of £1.3 billion, which is being repaid by a supplementary rate of 4.3% of employers’ pension contributions over a 15-year period from 1 April 2019. This contribution is included in the 23.0% employers’ contribution rate.
As the scheme is unfunded, there can be no deficit or surplus to distribute on the wind-up of the scheme or withdrawal from the scheme.
C ) Universities Superannuation Scheme (USS)
The University participates in the Universities Superannuation Scheme, which is a hybrid pension scheme, providing defined benefits (for all members), as well as defined contribution benefits. The assets of the scheme are held in a separate trustee-administered fund. Because of the mutual nature of the scheme, the scheme’s assets are not attributed to individual institutions and a scheme-wide contribution rate is set. The University is therefore exposed to actuarial risks associated with other institutions’ employees and is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. As required by Section 28 of FRS 102 “Employee benefits”, the University therefore accounts for the scheme as if it were a wholly defined contribution scheme. As a result, the amount charged to the consolidated Statement of Comprehensive Income and Expenditure represents the contributions payable to the scheme in respect of the accounting period.
The University has entered into an agreement (the Recovery Plan) that determines how each employer within the scheme will fund the overall deficit). In accordance with the requirements of the SORP, the University recognises a liability for the contributions payable that arise from the agreement (to the extent that they relate to the deficit), and therefore an expense is recognised.
The latest available complete actuarial valuation of the Retirement Income Builder section of the Scheme is at 31 March 2017 (the valuation date), which was carried out using the projected unit method. As at the year end a valuation as at 31 March 2018 was underway but not yet complete. Since the University cannot identify its share of the assets and liabilities in the Retirement Income Builder section of the scheme, the following disclosures reflect those relevant for the section as a whole.
The 2017 valuation was the fourth valuation for USS under the scheme-specific funding regime introduced by the Pensions Act 2004, which requires schemes to adopt a statutory funding objective, which is to have sufficient and appropriate assets to cover their technical provisions. At the valuation date, the value of the assets of the scheme was £60.0 billion and the value of the scheme’s technical provisions was £67.5 billion indicating a shortfall of £7.5 billion and a funding ratio of 89%.
