Notes to the Financial Statements
|
1. Tuition Fees and Education Contracts (Consolidated and University) |
2022/23 £000 |
2021/22 £000 |
| Scotland home domicile fees | 7,847 | 7,735 |
| European Union domicile fees | 2,135 | 2,163 |
| Rest of UK domicile fees | 1,706 | 1,971 |
| Non-European Union domicile fees | 5,255 | 3,545 |
| Other non-credit bearing course fees and discounts | (1,134) | (576) |
| Education contracts | 2,359 | 2,265 |
| 18,168 | 17,103 |
|
2. Scottish Funding Council Grants (Consolidated and University) |
2022/23 £000 |
2021/22 £000 |
| Recurrent grants | ||
| General Fund - Teaching | 17,367 | 16,308 |
| General Fund - Research and Innovation | 1,714 | 1,846 |
| Specific grants | ||
| Capital maintenance grants | 378 | 972 |
| Ring-fenced grants funded by Scottish Government | 2,097 | 1,831 |
| Deferred capital grants released (Note 16) | 649 | 649 |
| 22,204 | 21,606 |
| 3. Research Grants & Contracts | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| Research councils | 136 | 205 | 136 | 205 |
| UK based charities | 230 | 177 | 224 | 177 |
| UK government and health authorities | 967 | 1,784 | 964 | 1,376 |
| UK Private Sector | 24 | - | 24 | - |
| European funding | 531 | 400 | 531 | 386 |
| Other grants & contracts | 127 | 205 | 127 | 205 |
| 2,015 | 2,771 | 2,006 | 2,349 | |
| 4. Other Operating Income | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| Residences, catering and conferences | 5,981 | 5,028 | 5,506 | 4,789 |
| Other services rendered | 347 | 216 | 241 | 65 |
| Sports centre income | 208 | 182 | 208 | 182 |
| Other income | 785 | 970 | 1,132 | 1,127 |
| 7,321 | 6,396 | 7,087 | 6,163 | |
| 5. Investment Income | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| Other investment income | 586 | 72 | 568 | 71 |
| Interest On Pension Asset | 412 | - | 412 | - |
| 998 | 72 | 980 | 71 | |
|
6. Donations and Endowments (Consolidated and University) |
2022/23 £000 |
2021/22 £000 |
| Unrestricted donations | 410 | 369 |
| 410 | 369 |
| 7. Staff Costs | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| Staff costs | ||||
| Wages and salaries | 22,517 | 19,555 | 22,411 | 19,318 |
| Social security costs | 2,349 | 2,081 | 2,349 | 2,081 |
| Movement on USS provision | (13) | 1,117 | (13) | 1,117 |
| Other pension costs | 5,066 | 6,463 | 5,066 | 6,463 |
| 29,920 | 29,216 | 29,814 | 28,979 | |
| Emoluments of the Principal and Vice-Chancellor |
2022/23 £000 |
2021/22 £000 |
| Sir Paul Grice | ||
| Salary * | 210 | 203 |
| Employers' pension contributions | - | - |
| In lieu of employers' pension contribution | 35 | 35 |
| Total | 245 | 238 |
* The head of the University's basic salary is 5.68 times the median pay of staff (2021/22 : 5.65 times), 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 Senior Leadership Team. The total compensation for the year ended 31 July 2023 (including any employers’ pension contributions) was £1,003,273 (year ended 31 July 2022 £967,263).
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. Other than the Chair, 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.
| Directors' emoluments (including pension contributions) |
2022/23 £000 |
2021/22 £000 |
| Fees for services as members of the University Court | 15 | 15 |
| Emoluments (i.e. salaries as members of staff) | 630 | 574 |
| Contributions paid to pension schemes | 86 | 78 |
| Total | 732 | 667 |
These figures relate to 9 members of staff, including the Principal (2021/22 : 9)
The number of members of staff, including the Principal, who received remuneration (including benefits and excluding pension contributions) in each of the following ranges was:-
| Senior post holders |
2022/23 Number |
2021/22 Number |
| £100,001 to £110,000 | - | 2 |
| £110,001 to £120,000 | 1 | - |
| £120,001 to £130,000 | - | 1 |
| £130,001 to £140,000 | 1 | - |
| £210,001 to £220,000 | - | - |
| £230,001 to £240,000 | - | 1 |
| £240,001 to £250,000 | 1 | - |
No compensation payments were made to senior post holders in respect loss of office (2021/22: Nil).
|
Average full time equivalent (FTE) staff numbers by major category: (Consolidated and University) |
2022/23 FTE Number |
2021/22 FTE Number |
| Academic schools | 226 | 205 |
| Academic services | 63 | 61 |
| Research grants & contracts | 28 | 32 |
| Residences, catering & conferences | 20 | 17 |
| Premises | 25 | 27 |
| Administration & central services | 133 | 115 |
| 495 | 457 |
| 8. Interest payable and other finance costs | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| Loan interest | 746 | 1,000 | 746 | 1,000 |
| Net charge on pension scheme | 61 | 366 | 61 | 366 |
| 807 | 1,366 | 807 | 1,366 | |
| 9. Analysis of total expenditure by activity | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| Academic schools | 18,622 | 15,471 | 18,622 | 15,471 |
| Academic services | 5,385 | 4,893 | 5,385 | 4,893 |
| Research grants & contracts | 1,853 | 2,771 | 1,835 | 2,348 |
| Other services rendered | 329 | 216 | 233 | 65 |
| Residences, catering and conferences | 3,491 | 3,138 | 3,369 | 3,075 |
| Premises | 9,161 | 8,023 | 9,161 | 8,023 |
| Administration & central services | 10,254 | 9,655 | 10,230 | 9,636 |
| Other expenses | 1,860 | 4,556 | 1,860 | 4,556 |
| Total per income and expenditure account | 50,955 | 48,723 | 50,694 | 48,067 |
| 10. Other operating expenses | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| External auditors - audit fees | 144 | 139 | 123 | 123 |
| External auditors - non-audit fees | 4 | 3 | - | - |
| Internal audit | 22 | 44 | 22 | 44 |
| Grants to QMU Students' Union | 294 | 274 | 294 | 274 |
| Other expenses | 14,360 | 12,869 | 14,228 | 12,469 |
| 14,823 | 13,329 | 14,668 | 12,910 | |
|
11. Intangible Assets (Consolidated and University) |
£000 |
|
Cost or valuation: |
|
| At August 2022 | 595 |
| Additions at cost | 308 |
| At 31 July 2023 | 903 |
| Amortisation: | |
| At 1 August 2022 | 66 |
| Provided during the year | 173 |
| At 31 July 2023 | 239 |
| Net book amount at 31 July 2023 | 664 |
| Net book amount at 1 August 2022 | 529 |
|
12. Tangible Assets (Consolidated and University) |
Freehold land & Buildings | Fixtures, fittings & equipment | Total |
| Cost or valuation: | £000 | £000 | £000 |
| At 1 August 2022 | 132,925 | 9,025 | 141,950 |
| Additions at cost | - | 260 | 260 |
| Under construction | - | 41 | 41 |
| Revaluation of buildings | 3,099 | - | 3,099 |
| At 31 July 2023 | 136,024 | 9,324 | 145,348 |
| Depreciation: | |||
| At 1 August 2022 | - | 8,387 | 8,387 |
| Written back due to revaluation | (4,910) | - | (4,910) |
| Provided during the year | 4,910 | 322 | 5,232 |
| At 31 July 2023 | - | 8,707 | 8,707 |
| Net book amount at 31 July 2023 | 136,024 | 617 | 136,641 |
| Net book amount at 1 August 2022 | 132,925 | 637 | 133,562 |
| Analysis of net book amount at 31 July 2023 | |||
| Financed by capital grant | 4,926 | - | 4,926 |
| Other | 131,098 | 617 | 131,679 |
| 136,024 | 617 | 136,641 |
The heritable properties comprising Queen Margaret University’s property estate were valued as at 31 July 2023 by an external valuer, Gerald Eve LLP, a regulated firm of Chartered Surveyors. The valuation was prepared in accordance with the requirements of the RICS Valuation - Global Standards 2022 and the national standards and guidance set out in the UK national supplement (November 2018), the International Valuation Standards, Financial Reporting Standard 102 and the 2019 Statement of Recommended Practice 'Accounting for Further and Higher Education'. The valuations of specialised properties were derived using the Depreciated Replacement Cost (DRC) method, whilst the student residences were valued as a trading entity using a Discounted Cash Flow (DCF).
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
| Name of undertaking | Country of incorporation and registration | Description of shares held | Proportion of nominal value of shares held % | Cost at 31 July 2023 | Cost at 1 August 2022 |
| QMU Enterprises Ltd | Scotland | Ordinary £1 shares | 100 | 100 | 100 |
| Edinburgh Innovation Park Joint Venture Company Ltd | Scotland | Ordinary £1 shares | 50 | 1 | 1 |
| 101 | 101 |
QMU Enterprises Limited, a wholly owned subsidiary company, 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 QMU Enterprises Limited have been consolidated into the group financial statements.
On 12 April 2022, the University entered into a joint venture agreement with East Lothian Council, with the purpose of constructing and managing the Edinburgh Innovation Park, which is to be developed on land adjacent to the University campus. The University and East Lothian Council each hold one share in Edinburgh Innovation Park Joint Venture Company, with a nominal value of £1 per share.
| 14. Trade and other receivables | Consolidated | University | ||
| Amounts falling due within one year: |
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
| Trade debtors | 883 | 661 | 777 | 573 |
| Prepayments and accrued income | 1,820 | 936 | 1,805 | 934 |
| Amounts due from subsidiary company | - | - | 582 | 375 |
| Amounts due from joint venture | - | 125 | - | 125 |
| 2,703 | 1,722 | 3,163 | 2,007 | |
| 15. Creditors: Amounts falling due within one year | Consolidated | University | ||
|
2022/23 £000 |
2021/22 £000 |
2022/23 £000 |
2021/22 £000 |
|
| Secured loans (see note 16) | 1,343 | 1,343 | 1,343 | 1,343 |
| Trade creditors | 793 | 1,433 | 791 | 1,431 |
| Social security and other taxation payable | 762 | 678 | 680 | 678 |
| Accruals and deferred income | 6,390 | 5,663 | 6,090 | 5,376 |
| Unsecured loans | 171 | 168 | 171 | 168 |
| Deferred capital grants (see note 16) | 649 | 649 | 649 | 649 |
| Amounts Due to Joint Venture | 89 | - | 89 | - |
| 10,195 | 9,934 | 9,812 | 9,645 | |
| 16. Creditors: Amounts falling due after more than one year | Consolidated and University | |
|
2023 £000 |
2022 £000 |
|
| Secured loans | 15,809 | 17,151 |
| Unsecured loans | 2,368 | 2,534 |
| Deferred capital grants | 4,962 | 5,611 |
| 23,139 | 25,296 | |
| Analysis of secured loans:- | ||
| Due between one and two years | 15,809 | 1,343 |
| Due between two and five years | - | 15,808 |
| Due in five years or more | - | - |
| Total due after more than one year | 15,809 | 17,151 |
| Due within one year (note 15) | 1,343 | 1,343 |
| Total secured loans | 17,151 | 18,494 |
| Analysis of unsecured loans:- | ||
| Due between one and two years | 171 | 168 |
| Due between two and five years | 455 | 474 |
| Due in five years or more | 1,743 | 1,892 |
| Total due after more than one year | 2,368 | 2,534 |
| Due within one year (note 15) | 171 | 168 |
| Total unsecured loans | 2,539 | 2,702 |
| Analysis of Deferred capital grants:- | ||
| Due between one and two years | 649 | 649 |
| Due between two and five years | 1,947 | 1,947 |
| Due in five years or more | 2,366 | 3,015 |
| Total due after more than one year | 4,962 | 5,611 |
| Due within one year (note 16) | 649 | 649 |
| Total Deferred capital grants | 5,611 | 6,260 |
The secured loan from Barclays is repayable in full on 17 December 2024. The loan is therefore shown as being fully repayable within five years. It is the University’s intention that a significant proportion of this loan will be refinanced at the repayment date. The loan is secured over part of the campus site at Musselburgh.
The expiry date of the current funding arrangement falls within the period of review considered under Going Concern, giving rise to the modified audit opinion as presented in this document. It should be noted that this modification specifically relates to the material uncertainty originating with the expiration of the current funding arrangement and no other aspect of University finances.
The University has initiated early re-financing discussions providing assurance that refinancing is both possible an on more reflective covenant terms that current arrangements.
The unsecured loans have been provided by the Scottish Funding Council. £2.647 million has been provided under the Financial Transactions scheme. This loan is unsecured, and is repayable in equal quarterly instalments over the period to 31 March 2040.
Deferred capital grants due to be released within one year are included within Creditors : amounts falling due within one year.
|
17. Pension Assets & Provisions (Consolidated and University) |
Obligation to fund deficit on USS Pension £'000 |
Pension enhancements £'000 |
Defined benefit assets & obligations LGPS £'000 |
Total pensions provisions £'000 |
| At August 2022 (Restated) | (1,842) | (2,073) | 8,571 | 4,656 |
| Utilised in year | 116 | 204 | (255) | 65 |
| Transfer (to) / from income & expenditure account | (165) | (403) | 15,831 | 15,264 |
| At 31 July 2023 | (1,891) | (2,272) | 24,147 | 19,984 |
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 21(C).
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 2023, on the basis of valuation prescribed by FRS 102, and using the same set of assumptions as are set out in note 21 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 21(A).
| 18. Endowment Reserves | Consolidated and University | ||
|
Restricted Expendable £000 |
Restricted Permanent £000 |
Restricted Total £000 |
|
| Balance at 1 August 2022 | 1,171 | 47 | 1,219 |
| Income for year | 410 | - | 410 |
| Expenditure for year | (477) | - | (477) |
| At 31 July 2023 | 1,104 | 47 | 1,152 |
| Represented by: | |||
| Capital value | - | 36 | 36 |
| Accumulated income | 1,104 | 12 | 1,116 |
| 1,104 | 47 | 1,152 | |
| 19. Revaluation Reserve | Consolidated and University | |
|
2023 £000 |
2022 £000 |
|
| At 1 August 2022 | 80,889 | 66,435 |
| Revaluation (losses) / gains | 8,009 | 14,456 |
| Release to general reserve | - | - |
| At 31 July 2023 | 88,898 | 80,891 |
|
20. Consolidated Reconciliation of Net Debt (Consolidated and University) |
£000 |
| Net debt at 1 August 2022 | 5,952 |
| Increase in cash and bank balances | 2,206 |
| Secured loans repaid | (1,343) |
| Unsecured loans taken out | - |
| Unsecured loans repaid | (163) |
| Net debt at 31 July 2023 | 6,652 |
| 20. Consolidated Reconciliation of Net Debt (Continued) | Consolidated and University | |
| Analysis of net debt |
2023 £000 |
2022 £000 |
| Cash at bank and in hand | (17,450) | (15,244) |
| Borrowings: amounts falling due within one year | ||
| Secured loans | 1,343 | 1,343 |
| Unsecured loans | 171 | 168 |
| 1,514 | 1,511 | |
| Borrowings: amounts falling due after more than one year | ||
| Secured loans | 15,809 | 17,151 |
| Unsecured loans | 2,368 | 2,534 |
| 18,177 | 19,685 | |
| Net debt as at 31 July 2023 | 2,241 | 5,952 |
21. Pensions and similar assets / obligations
The University’s employees belong to three principal pension schemes, the Scottish Teachers Pension Scheme (STPS), the Local Government Pension Scheme (LGPS) and the Universities Superannuation Scheme (USS).
| Consolidated and University | ||
| The total pension charge is analysed as follows:- |
Year ended 31 July 2023 £000 |
Year ended 31 July 2022 £000 |
| Lothian Pension Fund (LGPS) | 2,284 | 4,192 |
| Scottish Teachers' Pension Scheme | 2,333 | 1,882 |
| Universities Superannuation Scheme | 393 | 1,506 |
| 5,010 | 7,580 | |
Estimated employers’ pension contributions for the year to 31 July 2023 are £4,533,000. Actual employers’ pension contributions in the year to 31 July 2022 were £4,342,000.
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 2020 updated to 31 July 2023 by a qualified independent actuary, Hymans Robertson LLP.
| Assumptions at | 31 July 2023 | 31 July 2022 | 31 July 2021 |
| Pension increase rate | 3.00% | 2.75% | 2.85% |
| Salary increase rate | 3.5% | 3.25% | 3.35% |
| Discount rate | 5.05% | 3.50% | 1.60% |
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 20.4%.
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 assumptions noted above relate to expectations across the duration of the scheme and therefore are based on longer-term estimations.
The mortality assumptions used to value the Obligations in the University’s Closing Position are different to those used to value the Obligations in the University’s Opening Position. A commutation allowance is included for future retirements to elect to take 50% of the maximum additional tax-free cash up to HMRC limits for pre-April 2009 service and 75% of the maximum tax-free cash for post-April 2009 service. All other demographic assumptions are consistent with those used for the latest formal funding valuation, and include sufficient allowance for future improvements in mortality rates. Life expectancy is based on the Fund's VitaCurves with improvements in line with the CMI 2021 model, with a 0% weighting of 2021 (and 2020) data, standard smoothing (Sk7), initial adjustment of 0.25% and a long term rate of improvement of 1.5% p.a. for both males and females.
| The assumed life expectations on retirement at age 65 are:- |
31 July 2023 No. of years |
31 July 2022 No. of years |
| Current pensioners | ||
| Males | 19.8 | 20.3 |
| Females | 22.7 | 23.1 |
| Future pensioners (assumed aged 45 at last formal revaluation date) | ||
| Males | 21.0 | 21.6 |
| Females | 24.5 | 25.0 |
| Analysis of the amount shown in the balance sheet |
Value at 31 July 2023 £000 |
Value at 31 July 2022 £000 |
Value at 31 July 2021 £000 |
Value at 31 July 2020 £000 |
Value at 31 July 2019 £000 |
| Estimated employer assets (A) | 75,944 | 74,429 | 69,844 | 60,469 | 63,223 |
| Present value of scheme liabilities | (51,797) | (61,832) | (90,361) | (90,773) | (77,851) |
| Present value of unfunded liabilities | (377) | (470) | (573) | (680) | (697) |
| Total value of liabilities (B) | (52,174) | (62,302) | (90,934) | (91,453) | (78,548) |
| Net pension asset / (liability) (A) - (B) | 23,770 | 12,127 | (21,090) | (30,984) | (15,325) |
* In accordance with the accounting policy adopted by the University, where the calculation above results in a net asset, recognition of the asset is limited to the extent to which the University is able to recover its share of the surplus, either through reduced contributions in the future or through refunds from the scheme. In 2023 the University has now recognised the net asset in full, to reflect that in line with FRS 102 accounting standards there is a theoretical right to refund and therefore the asset should be recognised as such based on the FRS 102 accounting estimates at the balance sheet date.
The University’s liability to unfunded pensions has been recognised separately within provisions.
| Analysis of movements in the present value of the scheme liabilities |
31 July 2023 £000 |
(Reinstated) 31 July 2022 £000 |
| Opening defined benefit obligation | 62,302 | 90,934 |
| Current service cost | 2,274 | 4,192 |
| Interest cost on defined benefit obligation | 2,199 | 1,479 |
| Contributions by members | 510 | 471 |
| Actuarial losses / (gains) | (13,450) | (33,208) |
| Unfunded benefits paid | (34) | (43) |
| Benefits paid | (1,627) | (1,523) |
| Closing defined benefit obligation | 52,174 | 62,302 |
| Analysis of movement in the market value of the scheme assets |
31 July 2023 £000 |
(Reinstated) 31 July 2022 £000 |
| Opening fair value of employer assets | 74,429 | 69,844 |
| Expected return on assets | 984 | 3,082 |
| Other experience | - | - |
| Contributions by members | 510 | 471 |
| Contributions by employer | 1,573 | 1,435 |
| Contributions in respect of unfunded benefits | 34 | 43 |
| Interest income on plan assets | 2,611 | 1,120 |
| Unfunded benefits paid | (34) | (43) |
| Benefits paid | (1,627) | (1,523) |
| Closing fair value of employer assets | 78,480 | 74,429 |
The significant increase in the net pension asset at 31 July 2023 is primarily due to an increase in the net discount rate used to measure the university’s obligations and stronger than expected investment returns.
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 led to increased costs for schemes (including the LGPS) and hence for scheme employers.
An allowance for full GMP indexation was included within the 31 March 2020 funding valuation position and therefore the allowance is automatically included within the balance sheet figure at 31 July 2023. It is anticipated that a further ruling relating to historical transfers is unlikely to be significant in terms of impact on the University’s pension obligations. As a result, no allowance has been made for this within the calculation of the level of provision at 31 July 2023.
In April 2015, wholesale changes were made to the Local Government Pension Scheme in Scotland to reform the scheme’s benefits structure. These changes were implemented as part of wider reforms to public sector pensions introduced by the UK Government’s Public Service Pensions Act 2013.
In the LGPS, these changes included moving benefit accrual from a final salary to a career average basis, and linking members’ normal retirement age to their state pension age. Transitional provisions were introduced for members who were within 10 years of normal retirement age in 2012. These transitional protection arrangements applied across public service pension schemes where older members were permitted to remain in their pre-2015 schemes.
In the LGPS all members were moved onto the new arrangements from 1 April 2015. However those within 10 years of their normal pension age on 1 April 2012 were protected through a statutory ‘underpin’. This underpin protection provides that additional checks are undertaken for qualifying members to ensure that the career average pension payable under the reformed LGPS is at least at high as the member would have been entitled to receive under the final salary scheme.
Where it is not as high, scheme regulations provide that an addition must be applied to the member’s career average pension to make up the shortfall. In the ‘McCloud’ and ‘Sargeant’ court cases (which related to the judicial and firefighters’ pension schemes respectively), the Court of Appeal found that the transitional protection arrangements directly discriminated against younger members in those schemes.
In July 2019, the UK government confirmed its view that these rulings had implications for all the main public service pension schemes, including the LGPS, and that the discrimination would require to be addressed in all the relevant schemes, regardless of whether members had lodged a legal claim.
An allowance for the estimated impact of the McCloud judgement was included within the 31 March 2020 funding valuation position. The impact was calculated based on the eligibility criteria of being included within the proposed solution for the McCloud judgement (i.e. any active member who was a participant in the Fund as at 1 April 2012 will be given the greater of the final salary pension or CARE pension upon retirement). The McCloud allowance will therefore automatically be included within the 31 July 2023 balance sheet provision.
B) Scottish Teachers’ Pension Scheme (STPS)
The Scottish Teachers’ Pension Scheme is an unfunded statutory public service pension scheme with benefits underwritten by the UK Government. The scheme is financed by payments from employers and from those current employees who are members of the scheme and who pay contributions at progressively higher marginal rates based on pensionable pay, as specified in the regulations.
The rate of employer contributions is set with reference to a funding valuation undertaken by the scheme actuary. The last four-yearly valuation was undertaken as 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).
The valuation informed an increase in the employer contribution rate from 17.2% to 23.0% of pensionable pay from September 2019 and an anticipated yield of 9.4% of pensionable pay from employee contributions. 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. The University has no liability for other employers’ obligations to the multi-employer scheme. 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.
The scheme is an unfunded multi-employer defined benefit 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.
While a valuation was carried out as at 31 March 2016, it is not possible to say what deficit or surplus may affect future contributions. Work on the most recent valuation was suspended by the UK Government pending the decision from the Court of Appeal (McCloud (Judiciary scheme)/Sargeant (Firefighters’ Scheme) cases, that held that the transitional protections provided as part of the 2015 reforms unlawfully discriminated on the grounds of age.
Following consultation and an announcement in February 2021 on proposals to remedy the discrimination, the UK Government confirmed that the cost control element of the 2016 valuations could be completed. The UK Government has also asked the Government Actuary to review whether, and to what extent, the cost control mechanism is meeting its original objectives. The 2020 actuarial valuations will take the report’s findings into account.
The interim report is complete (restricted) and is currently being finalised with a consultation. Alongside these announcements, the UK Government confirmed that current employer contribution rates would stay in force until 1 April 2024.
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 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 is at 31 March 2020 (the valuation date), which was carried out using the projected unit method. Since the University cannot identify its share of the assets and liabilities in the Retirement Income Builder (defined benefit) section of the scheme, the following disclosures reflect those relevant for those assets and liabilities as a whole.
The 2020 valuation was the sixth valuation for the scheme 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 £66.5 billion and the value of the scheme’s technical provisions was £80.6 billion indicating a shortfall of £14.1 billion and a funding ratio of 83%.
The key financial assumptions used in the 2020 valuation are described below. More detail is set out in the .
|
CPI assumption |
Term dependent rates in line with the difference between the Fixed Interest and Index Linked yield curves less: 1.1% p.a. to 2030, reducing linearly by 0.1% p.a. to a long-term difference of 0.1% p.a. from 2040 |
| Pension increases (subject to a floor of 0%) | CPI assumption plus 0.05% |
| Discount rate (forward rates) | Fixed interest gilt yield curve plus:
|
The main demographic assumption used relates to the mortality assumptions. The assumptions are based on analysis of the scheme’s experience carried out as part of the 2020 actuarial valuation. The mortality assumptions used in these figures are as follows:-
| 2020 valuation | |
| Mortality base table | 101% of S2PMA "light" for males and 95% of S3PFA for females |
| Future improvements to mortality | CMI 2019 with a smoothing parameter of 7.5, an initial addition of 0.5% p.a. and a long-term improvement rate of 1.8% pa for males and 1.6% pa for females |
| The current life expectancies on retirement at age 65 are: | 2023 | 2022 |
| Males currently aged 65 (years) | 23.9 | 23.9 |
| Females currently aged 65 (years) | 25.5 | 25.5 |
| Males currently aged 45 (years) | 25.9 | 25.9 |
| Females currently aged 45 (years) | 27.3 | 27.3 |
A new deficit recovery plan was put in place as part of the 2020 valuation, which requires payment of 6.2% of salaries over the period 1 April 2022 until 31 March 2024, at which point the rate will increase to 6.3%. The 2022 deficit recovery liability reflects this plan. The liability figures have been produced using the following assumptions:
| 2023 | 2022 | |
| Discount rate | 3.31% | 3.31% |
| Pensionable salary growth | 3.00% | 3.00% |
D) Other pension liabilities
The University 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 2023 on the basis of valuation prescribed by FRS 102. The total provision in respect of this liability is £1.895 million (2022: £2.073 million).
22. Financial Instruments
The University applies the provisions of Sections 11 and 12 of FRS 102 in full. The University’s financial assets and liabilities all meet the criteria for basic financial instruments prescribed within FRS 102 – Section 11.8.
23. Related Party Transactions
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.
24. Hardship and Childcare Funds
|
2022/23 £000 |
2021/22 £000 |
|
| Hardship Fund (Undergraduate and Postgraduate) | ||
| Balance at 1 August | 0 | 327 |
| Amounts received from Student Awards Agency for Scotland | 198 | 202 |
| Interest received | 4 | 1 |
| Amount vired (to) / from Childcare Fund | 52 | 67 |
| 253 | 597 | |
| Disbursed to students | (253) | (579) |
| Other costs | - | (12) |
| Refunded to Student Awards Agency for Scotland | - | (6) |
| Balance unspent at 31 July | - | - |
| Childcare Fund | ||
| Balance at 1 August | - | - |
| Amounts received from Student Awards Agency for Scotland | 145 | 154 |
| Interest Received | 2 | - |
| 147 | 154 | |
| Disbursed to students | (111) | (87) |
| Amount vired (to) / from Hardship Fund | (36) | (67) |
| Refunded to Student Awards Agency for Scotland | - | - |
| Balance unspent at 31 July | - | - |
Amounts received from the Student Awards Agency for Scotland are available solely for students; the University acts only as paying agent. The grants and related disbursements are therefore excluded from the Statement of Comprehensive Income and Expenditure.
25. Prior Period Restatement
In the prior year financial statements, the University recognised a nil pension asset on the basis not being able to recover any of its share on the Lothian Pension Fund without exiting the scheme and being subject to a cessation valuation from the scheme actuary.
In 2023 the University has now recognised the net asset in full, to reflect that in line with FRS 102 accounting standards there is a theoretical right to refund and therefore the asset should be recognised as such based on the FRS 102 accounting estimates at the balance sheet date. The prior year balances have been restated accordingly, with the impact on the relevant balances being as set out in the table below.
All impacted notes have been disclosed as restated.
|
Previous accounts (£'000) |
Adjustment (£'000) |
These accounts (£'000) |
|
| LGPS Pension Asset - balance sheet | £Ծ | £8,571 | £8,571 |
| Actuarial gain / (loss) in respect of pension schemes | £24,163 | £8,571 | £32,731 |
