Notes to the financial statements
NOTES TO THE FINANCIAL STATEMENTS
1.0 Tuition Fees and EducationContracts
| Tuition Fees and EducationContracts |
2020/21 |
2019/20 |
|---|---|---|
|
(consolidated and university) |
||
|
Scottish higher education students |
6,504 |
5,708 |
|
Rest of UK students |
1,560 |
1,016 |
|
European Union (excluding UK) students |
2,564 |
2,881 |
|
Non-European Union students |
2,473 |
2,326 |
|
Other fees and discounts |
(355) |
(363) |
|
Education contracts |
2,312 |
2,350 |
|
|
15,058 |
13,918 |
2.0 Scottish Funding Council Grants
| Scottish Funding Council Grants | 2020/21 | 2019/20 |
|---|---|---|
| (consolidated and university) | ||
| Recurrent Grant | ||
|
Teaching |
14,351 | 13,517 |
|
Research |
1,473 | 1,108 |
| Specific Grants | ||
|
Wider access retention funding |
611 | 597 |
|
Other specific grants |
412 | 65 |
|
Disabled students premium |
60 | 57 |
|
Knowledge exchange / University Innovation Fund |
392 | 385 |
|
Other teaching grants |
895 | 293 |
|
Capital maintenance grant released |
468 | 344 |
|
COVID support grants |
1,110 | - |
|
Other miscellaneous grants |
286 | 157 |
|
Deferred capital grants released (note15) |
||
|
Land & buildings |
649 | 649 |
|
|
20,707 |
17,171 |
3.0 Research Grants & Contracts
| Research Grants & Contracts |
Consolidated |
Consolidated |
University |
University |
|---|---|---|---|---|
|
2020/21 £000 |
2019/20 £000 |
2020/21 £000 |
2019/20 £000 |
|
|
Research councils |
210 | 303 | 210 | 303 |
|
UK based charities |
137 | 148 | 118 | 138 |
|
UK government and health authorities |
2,225 | 1,729 | 2,067 | 1,729 |
|
UK private sector |
- | 5 | - | - |
|
European funding |
325 | 110 | 325 | 108 |
|
Other grants & contracts |
89 | 126 | 89 | 126 |
|
|
2,986 |
2,421 |
2,809 |
2,404 |
4. Other Operating Income
| Other Operating Income | Consolidated | Consolidated | University | University |
|---|---|---|---|---|
|
2020/21 £000 |
2019/20 £000 |
2020/21 £000 |
2019/20 £000 |
|
|
Residences, catering and conferences |
3,541 | 3,872 | 3,495 | 3,603 |
|
Other services rendered |
387 | 505 | 79 | 331 |
|
Sports centre income |
59 | 70 | 91 | 70 |
|
Coronavirus Job Retention Scheme income |
91 | 70 | 91 | 70 |
|
Other income |
721 | 1,937 | 749 | 2,157 |
|
|
4,799 |
6,532 |
4,473 |
6,308 |
5. Investment Income
| Investment Income | Consolidated | Consolidated | University | University |
|---|---|---|---|---|
|
2020/21 £000 |
2019/20 £000 |
2020/21 £000 |
2019/20 £000 |
|
|
Other investment income |
15 | 56 | 15 | 55 |
|
|
15 | 56 | 15 | 55 |
6. Donations and Endowments
|
Donations and Endowments (consolidated and university) |
2020/21 £000 |
2019/20 £000 |
|---|---|---|
|
Unrestricted donations |
466 |
339 |
|
|
466 |
339 |
7 Staff Costs
| Staff Costs | Consolidated | Consolidated | University | University |
|---|---|---|---|---|
|
2020/21 £000 |
2019/20 £000 |
2020/21 £000 |
2019/20 £000 |
|
|
Staff costs |
||||
|
Wages and salaries |
18,800 |
17,300 |
18,628 |
17,236 |
|
Social security costs |
1,919 |
1,795 |
1,917 |
1,795 |
|
Movement on USS provision |
(29) |
(359) |
(29) |
(359) |
|
Other pension costs |
6,278 |
4,417 |
6,277 |
4,417 |
|
|
26,968 |
23,153 |
26,793 |
23,089 |
Emoluments of the Principal & Vice-Chancellor
| Emoluments of the Principal & Vice-Chancellor |
2020/21 £000 |
2019/20 £000 |
|---|---|---|
|
Sir Paul Grice (from 1 October 2019) |
||
|
Salary |
176 | 166 |
|
Employers’ pension contributions |
- | 23 |
|
In lieu of employers’ pension contribution |
35 | 9 |
|
Total |
211 | 198 |
|
|
||
|
Professor Richard Butt (Acting Principal, 1 August 2019 to 30 September 2019) |
||
|
Salary |
- | 23 |
|
Employers’ pension contributions |
- | 5 |
|
Total |
- | 28 |
Sir Paul Grice participated in the Lothian Pension Fund scheme from 1 October 2019 until 30 April 2020. With effect from 1 May 2020, in accordance with the policy approved by the University Court, an adjustment was made to Sir Paul’s salary equivalent to employers’ pension contributions foregone. The head of the University’s basic salary, including this adjustment, is 5.16 times the median pay of staff (2019/20 : 4.95 times), where the median pay is calculated on a full-time equivalent basis for the salaries paid by the University to its staff. Sir Paul accepted a 10% reduction in salary throughout the year to 31 July 2021 in recognition of the additional financial pressures faced by the University in relation to COVID-19
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 2021 (including any employers’ pension contributions) was £922,575 (year ended 31 July 2020, £916,919).
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) |
2020/21 £000 |
2019/20 £000 |
|---|---|---|
|
Fees for services as members of University Court |
5 | - |
|
Emoluments (i.e. salaries as members of staff) |
451 | 416 |
|
Contributions paid to pension schemes |
55 | 75 |
|
Total |
511 | 491 |
These figures relate to 8 members of staff, including the Principal(2019/20:7)
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 |
2020/21 Numbers |
2019/20 Numbers |
|---|---|---|
|
£100,001 to £110,000 |
2 |
2 |
|
£120,001 to £130,000 |
1 |
1 |
|
£170,001 to £180,000 |
- |
1 |
|
£210,001 to £220,000 |
1 |
- |
|
Average full time equivalent (FTE) staff numbers by major category: |
2020/21 FTE number |
2019/20 FTE number |
|---|---|---|
|
Academic schools |
202 | 182 |
|
Academic services |
53 | 44 |
|
Research grants & contracts |
31 | 37 |
|
Residences, catering & conferences |
15 | 16 |
|
Premises |
25 | 23 |
|
Administration & central services |
114 | 108 |
|
|
440 | 401 |
8 Interest Payable & Other Finance Costs
| Interest Payable & Other Finance Costs |
Consolidated |
Consolidated |
University |
University |
|---|---|---|---|---|
|
2020/21 £000 |
2019/20 £000 |
2020/21 £000 |
2019/20 £000 |
|
|
Loan interest |
1,090 | 1,187 | 1,090 | 1,187 |
|
Net charge on pension scheme |
455 | 361 | 455 | 361 |
| 1,545 | 1,548 | 1,545 | 1,548 |
9. Analysis of Total Expenditure by Activity
| Analysis of Total Expenditure by Activity |
Consolidated |
Consolidated |
University |
University |
|---|---|---|---|---|
|
2020/21 £000 |
2019/20 £000 |
2020/21 £000 |
2019/20 £000 |
|
|
Academic schools |
14,827 | 13,528 | 14,827 | 13,887 |
|
Academic services |
4,351 | 4,271 | 4,351 |
4,271 |
|
Research grants & contracts |
2,335 | 1,683 | 2,265 |
1,665 |
|
Other services rendered |
495 | 680 | 79 |
507 |
|
Residences, catering and conferences |
2,444 | 2,209 | 2,444 |
2,172 |
|
Premises |
6,949 | 7,514 | 6,949 |
7,514 |
|
Administration & central services |
8,832 | 9,657 | 8,815 |
9,284 |
|
Other expenses |
5,649 | 1,374 | 5,649 |
1,374 |
|
Total per income and expenditure account |
45,882 |
40,916 |
45,379 |
40,674 |
10. Other Operating Expenses
| Other Operating Expenses | Consolidated | Consolidated | University | University |
|---|---|---|---|---|
|
2020/21 £000 |
2019/20 £000 |
2020/21 £000 |
2019/20 £000 |
|
|
External auditors – audit fees |
101 | 112 | 87 | 100 |
|
External auditors – non-audit fees |
- | 2 | - | - |
|
Internal audit |
22 | 31 | 22 | 31 |
|
Grants to Ƶ Students’ Union |
261 | 252 | 261 | 252 |
|
Other expenses |
11,914 | 10,504 | 11,600 | 10,340 |
|
|
12,298 |
10,901 |
11,970 |
10,723 |
11. Tangible Assets
Consolidated and University
| Tangible Assets |
Freehold land & Buildings |
Fixtures,fittings & equipment |
Total |
|---|---|---|---|
| £000 | £000 | £000 | |
|
Cost or valuation: |
|||
|
At 1 August 2020 |
127,148 | 11,901 | 139,049 |
|
Additions at cost |
- | 90 | 90 |
|
Revaluation of buildings |
(4,412) |
- |
(4,412) |
|
At 31 July 2021 |
122,736 |
11,991 |
134,727 |
|
Depreciation: |
- | 10,294 | 10,294 |
|
At 1 August 2020 |
- | 10,294 | 10,294 |
|
Written back due to revaluation |
(4,267) |
- |
(4,267) |
|
Provided during the year |
4,267 |
804 | 5,071 |
|
At 31 July 2021 |
- |
11,098 |
11,098 |
|
Net book amount at 31 July 2021 |
122,736 |
893 |
123,629 |
|
Net book amount at 1 August 2020 |
127,148 |
1,607 |
128,755 |
|
Analysis of net book amount at 31 July 2021 |
|
|
|
|
Financed by capital grant |
6,909 |
- |
6,909 |
|
Other |
115,827 |
893 |
116,720 |
|
|
122,736 |
893 |
123,629 |
The heritable properties comprising Queen Ƶt University’s property estate were valued as at 31 July 2021 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 2020 and UK National Supplement, 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, with specialised properties valued by reference to Depreciated Replacement Cost, and with non-specialised operational properties valued on a Fair Value basis equating to Market Value on the assumption of a continuation of the existing use. The valuation is reported under the special assumption to exclude any value of development opportunities for which planning permission would be required and has not been granted or where development has not yet commenced.
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.
12. 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 2020 & 31 July 2021 |
|---|---|---|---|---|
| % | £ | |||
|
Ƶ Enterprises Ltd |
Scotland |
Ordinary £1 shares |
100 | 100 |
|
|
|
100 |
Ƶ 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 Ƶ Enterprises Limited have been consolidated into the group financial statements.
13.Trade and Other Receivables
| Trade and Other Receivables |
Consolidated |
Consolidated |
University |
University |
|---|---|---|---|---|
|
2021 £000 |
2020 £000 |
2021 £000 |
2020 £000 |
|
|
Trade debtors |
658 | 246 | 454 | 243 |
|
Prepayments and accrued income |
1,097 | 2,276 | 1,086 | 2,276 |
|
Amounts due from subsidiary company |
- | - | 243 | 463 |
|
|
1,755 |
2,522 |
1,783 |
2,982 |
14. Creditors: Amount falling due within one year
| Creditors: Amount falling due within one year |
Consolidated |
Consolidated |
University |
University |
|---|---|---|---|---|
|
2021 £000 |
2020 £000 |
2021 £000 |
2020 £000 |
|
|
Secured loans (see note 15) |
1,343 | 1,492 | 1,343 | 1,492 |
|
Trade creditors |
1,220 | 1,197 | 1,206 | 1,192 |
|
Social security and other taxation payable |
587 | 494 | 587 | 494 |
|
Accruals and deferred income |
6,438 | 4,058 | 6,253 | 4,003 |
|
Unsecured loans |
186 | 31 | 186 | 31 |
|
|
9,774 |
7,272 |
9,575 |
7,212 |
During the year to 31 July 2021, an additional loan of £2.834 million was taken out from the Scottish Funding Council under the Financial Transactions scheme. This loan is unsecured, and is repayable in equal quarterly instalments over the period to 31 March 2040. The additional loan was utilised to make a partial repayment of the secured loan from Barclays Bank plc.
The secured long-term loan facility with Barclays Bank plc is £24.836 million, and has a final maturity date of 17 December 2024. The university intends to enter into discussions to refinance the element of the loan which will remain outstanding in 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.
15.Creditor:Amount falling due after more than one year
| Creditor:Amount falling due after more than one year |
Consolidated and University |
Consolidated and University |
|---|---|---|
|
2021 £000 |
2020 £000 |
|
|
Secured loans (see note 14) |
23,493 |
27,595 |
|
Unsecured loans |
2,702 | 98 |
|
Deferred capital grants |
6,909 |
7,558 |
| 33,104 | 35,251 | |
|
Analysis of secured loans:- |
||
|
Due between one and two years |
1,343 |
1,492 |
|
Due between two and five years |
22,150 |
26,103 |
|
Due in five years or more |
- | - |
|
Total due after more than one year |
23,493 |
27,595 |
|
Due within one year (note 14) |
1,343 | 1,492 |
|
Total secured loans |
24,836 |
29,087 |
|
Analysis of unsecured loans:- |
||
|
Due between one and two years |
168 | 31 |
|
Due between two and five years |
493 | 67 |
|
Due in five years or more |
2,041 | - |
|
Total due after more than one year |
2,702 |
98 |
|
Due within one year (note 14) |
186 | 31 |
|
Total unsecured loans |
2,888 |
129 |
The analysis of secured loan balances as at 31 July 2020 has been restated from the position reported in the financial statements for the year to 31 July 2020. This reflects the position that 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 from the date of the 2020 financial statements. It is the University’s intention that a significant proportion of this loan will be refinanced at the repayment date.
Analysis of deferred capital grants
|
Buildings |
Consolidated and University 2021 £000 |
Consolidated and University 2020 £000 |
|---|---|---|
|
Opening balance |
7,558 |
8,207 |
|
Released during the year |
(649) | (649) |
|
Closing balance |
6,909 | 7,558 |
16.Provisions for Liabilities
Consolidated and University
| Provisions for Liabilities |
Obligation to fund deficit on USS Pension |
Pension enhancements |
Defined benefit obligations LGPS |
Total pensions provisions |
|---|---|---|---|---|
|
Pensions £’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
At 1 August 2020 |
743 | 2,846 | 30,984 | 34,573 |
|
Utilised in year |
(34) | (34) | - | (242) |
|
Transfer (to)/from income &expenditure account |
10 | (34) | (9,894) | (9,918) |
|
At 31 July 2021 |
719 | 2,604 | 21,090 | 24,413 |
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).
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 2021, 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).
17.Endowment Reserves
|
Endowment Reserves Consolidated and University |
Restricted Expendable £000 |
Restricted Permanent £000 |
Restricted Total £000 |
|---|---|---|---|
|
Balance at 1 August 2020 |
744 | 47 | 821 |
|
Income for year |
466 | - | 466 |
|
Expenditure for year |
(239) | - | (239) |
|
At 31 July 2021 |
1.001 | 47 | 1,048 |
|
Represented by: |
|||
|
Capital value |
- | 35 | 35 |
|
Accumulated income |
1,001 | 12 | 1,013 |
|
|
1,001 | 47 |
1,048 |
18 Revaluation Reserve
|
Revaluation Reserve Consolidated and University |
2021 £000 |
2020 £000 |
|---|---|---|
|
At 1 August |
66,580 | 61,412 |
|
Revaluation (losses) /gains |
(145) | 5,168 |
|
Release to general reserve |
- | - |
| At 31 July | 66,435 | 66,580 |
19.Consolidated Reconciliation of Net Debt
|
Consolidated Reconciliation of Net Debt - Consolidated and University |
£000 |
|---|---|
|
Net debt at 1 August 2020 |
20,444 |
|
Increase in cash and bank balances |
(6,835) |
|
Secured loans repaid |
(4,251) |
|
Unsecured loans taken out |
2,834 |
|
Unsecured loans repaid |
(75) |
|
Net debt at 31 July 2021 |
12,117 |
Analysis of net debt
|
Analysis of net debt Consolidated and University |
2021 £000 |
2020 £000 |
|---|---|---|
|
Cash at bank and in hand |
(15,607) | (8,772) |
|
Borrowings : amounts falling due within one year |
||
|
Secured loans |
1,343 | 1,492 |
|
Unsecured loans |
186 | 31 |
|
|
1,529 |
1,523 |
|
Borrowings : amounts falling due after more than one year |
||
|
Secured loans |
23,492 | 27,595 |
|
Unsecured loans |
2,702 | 98 |
|
|
26,195 |
27,693 |
|
Net debt as at 31 July |
12,117 |
20,444 |
20. Pensions and Similar 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). The total pension cost for the year was £6,249,000 (2019/20: £4,058,000).
|
Pensions and Similar Obligations Consolidated and University |
Year ended 31 July 2021 |
Year ended 31 July 2020 |
|---|---|---|
|
The total pension charge is analysed as follows:- |
£000 | £000 |
|
Lothian Pension Fund (LGPS) |
3,860 | 2,243 |
|
Scottish Teachers’ Pension Scheme |
2,059 | 1,823 |
|
Universities Superannuation Scheme |
330 | (8) |
|
6,249 |
4,058 |
Estimated employers’ pension contributions for the year to 31 July 2022 are £4,336,000. Actual employers’ pension contributions in the year to 31 July 2021 were £3,811,000.
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 2021 by a qualified independent actuary, Hymans Robertson LLP.
|
Assumptions at |
31 July 2021 |
31 July 2020 |
31 July 2019 |
|---|---|---|---|
|
Pension increase rate |
2.85% | 2.20% | 2.40% |
|
Salary increase rate |
3.35% | 3.90% | 4.10% |
|
Discount rate |
1.60% | 1.40% | 2.10% |
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 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:-
|
Current pensioners |
31 July 2021 No. of years |
31 July 2020 No. of years |
|---|---|---|
| Males | 20.5 | 21.5 |
| Females | 23.3 | 24.3 |
|
Future pensioners |
||
| Males | 21.9 | 24.7 |
| Females | 25.2 | 27.5 |
|
Analysis of the amount shown in the balance sheet |
Value at 31 July 2021 £000 |
Value at 31 July 2020 £000 |
Value at 31 July 2019 £000 |
Value at 31 July 2018 £000 |
Value at 31 July 2017 £000 |
|---|---|---|---|---|---|
|
Estimated employer assets (A) |
69,844 | 60,469 | 63,223 | 57,343 | 57,322 |
|
Present value of scheme liabilities |
(90,361) |
(90,773) |
(77,851) |
(62,495) |
(68,492) |
|
Present value of unfunded liabilities |
(573) |
(680) |
(697) |
(671) |
(701) |
|
Total value of liabilities (B) |
(90,934) |
(91,453) |
(78,548) |
(63,166) |
(69,193) |
|
Net pension liability (A) – (B) |
(21,090) |
(30,984) |
(15,325) |
(5,823) |
(11,871) |
|
Analysis of movements in the present value of the scheme liabilities |
31 July 2021 £000 |
31 July 2020 £000 |
|---|---|---|
|
Opening defined benefit obligation |
91,453 | 78,548 |
|
Current service cost |
3,837 |
3,018 |
|
Interest cost on defined benefit obligation |
1,298 |
1,672 |
|
Contributions by members |
453 |
429 |
|
Actuarial losses / (gains) |
(4,491) |
9,071 |
|
Past service costs |
- |
21 |
|
Unfunded benefits paid |
(43) |
(47) |
|
Benefits paid |
(1,573) |
(1,259) |
|
Closing defined benefit obligation |
90,934 |
91,453 |
|
Analysis of movement in the market value of the scheme assets |
31 July 2021 £000 |
31 July 2020 £000 |
|---|---|---|
|
Opening fair value of employer assets |
60,469 | 63,223 |
|
Expected return on assets |
8,696 | (4,652) |
|
Other experience |
(444) |
- |
|
Contributions by members |
453 | 429 |
|
Contributions by employer |
1,395 | 1,394 |
|
Contributions in respect of unfunded benefits |
43 | 47 |
|
Interest income on plan assets |
848 | 1,334 |
|
Unfunded benefits paid |
(43) | (47) |
|
Benefits paid |
(1,573) |
(1,259) |
|
Closing fair value of employer assets |
69,844 |
60,469 |
The significant reduction in the net pension liability at 31 July 2021 compared with the position at 31 July 2020 is due mainly to an increase in asset values during the year, following the significant asset losses experienced in the first half of 2020 due largely to COVID-19 and reflected in the asset valuation at 31 July 2020.
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 2021. 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 2021.
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 2021 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% 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. 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.
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.
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. The University has no obligation for other employers’ obligations to the multi-employer 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 is at 31 March 2018 (the valuation date), which was carried out using the projected unit method. A valuation as at 31 March 2020 was underway but had not been completed at 31 July 2021. The 2020 valuation was signed and filed with The Pensions Regulator with an effective date of 1 October 2021. Further details relating to the 2020 valuation are set out in note 21 below. 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 2018 valuation was the fifth 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 £63.7 billion and the value of the scheme’s technical provisions was £67.3 billion indicating a shortfall of £3.6 billion and a funding ratio of 95%.
The key financial assumptions used in the 2018 valuation are described below.
|
Pension increases (CPI) |
Term dependent rates in line with the difference between the Fixed Interest and Index Linked yield curves, less 1.3% p.a. |
|---|---|
|
Discount rate (forward rates) |
Years 1-10: CPI + 0.14% reducing linearly to CPI – 0.73% |
| Discount rate (forward rates) |
Years 11-20: CPI + 2.52% reducing linearly to CPI + 1.55 by year 21 |
| Discount rate (forward rates) |
Years 21 +: CPI + 1.55% |
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 2018 actuarial valuation. The mortality assumptions used in these figures are as follows:-
|
Mortality base table |
Pre-retirement: |
|---|---|
| Post retirement |
Post retirement: |
|
Future improvements to mortality |
CMI_2017 with a smoothing parameter of 8.5 and a long term improvement rate of 1.8% p.a. for males and 1.6% p.a. for females |
|
The current life expectancies on retirement at age 65 are: |
2021 | 2020 |
|---|---|---|
|
Males currently aged 65 (years) |
24.6 | 24.4 |
|
Females currently aged 65 (years) |
26.1 | 25.9 |
|
Males currently aged 45 (years) |
26.6 | 26.3 |
|
Females currently aged 45 (years) |
27.9 | 27.7 |
A new deficit recovery plan was put in place as part of the 2018 valuation, which requires payment of 2% of salaries over the period 1 October 2019 to 30 September 2021 at which point the rate will increase to 6%. The 2021 deficit recovery liability reflects this plan. The liability figures have been produced using the following assumptions:
| % |
2021 |
2020 |
|---|---|---|
|
Discount rate |
0.87% | 0.73% |
|
Pension increases (CPI) |
2.00% | 2.00% |
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 2021 on the basis of valuation prescribed by FRS 102. The total provision in respect of this liability is £2.604 million (2020: £2.846 million).
21. Post Balance Sheet Event
At the year end date, a further full valuation of the Universities Superannuation Scheme (USS), as at 31 March 2020, was underway. Work was still to be done agreeing the technical provisions assumptions, the extent of future investment risk, the duration of the deficit period and the level of deficit contributions. Rule changes in respect of strengthening the employer covenant were also in progress including restrictions on employer exits, debt monitoring and pari passu arrangements. The valuation did not meet its statutory deadline of 30 June 2021.
A new Schedule of Contributions based on the March 2020 actuarial valuation was agreed in September 2021. The valuation revealed a shortfall in assets, when measured against the Scheme’s technical provisions. The size of the shortfall is dependent on whether the anticipated benefit structure reforms and covenant support measures are implemented by 28 February 2022. If this takes place, the shortfall as at 31 March 2020 is £14.1 billion. If no Benefit Change Deed is entered into, the reduced level of covenant support results in an increase to the technical provisions and the shortfall as at 31 March 2020 is £18.4 billion. This represents a significant deterioration from the £3.6 billion deficit established under the 2018 valuation.
A new deficit recovery plan has been agreed which amends the existing deficit recovery plan set out in the 2018 valuation. Under the new plan, deficit recovery contributions cease from 1 October 2021 and recommence 1 April 2022 at 6.3% of salaries payable for the length of the recovery plan until 31 March 2038. This assumes the Benefit Change Deed is entered into by 28 February 2022. If no Benefit Change Deed is entered into by 28 February 2022, the new plan requires deficit recovery contributions from 1 October 2022 to commence at 3% of salaries then increase every six months by 3% until they reach 20% of salaries at 1 October 2025. They will then remain at this level until 31 July 2032.
As the 2020 Valuation effective date occurred after 31 July 2021 but before these financial statements were approved by the University Court, the 2020 Valuation constitutes a non-adjusting post balance sheet event. This means that the deficit recovery provision at year end has been based on the 2018 Valuation, which was binding at the year-end date. The impact of the revised DRCs arising from the 2020 valuation would have been to increase the required level of provision at 31 July 2021 from £0.719 million by £1.244 million, to an amount of £1.963 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
|
HARDSHIP FUND (undergraduate and postgraduate) |
2020/21 £000 |
2019/20 £000 |
|---|---|---|
|
Balance at 1 August |
- | - |
|
Amounts received from Student Awards Agency for Scotland |
664 | 261 |
|
Amount vired (to) /from Childcare Fund |
79 | 53 |
|
|
743 |
314 |
|
Disbursed to students |
(416) |
(313) |
|
Other costs |
- |
(1) |
|
Refunded to Student Awards Agency for Scotland |
- |
|
|
Balance unspent at 31 July |
327 | - |
|
Childcare fund |
||
|
Balance at 1 August |
- | - |
|
Amounts received from Student Awards Agency for Scotland |
144 | 149 |
|
|
144 | 149 |
|
Disbursed to students |
(65) | (96) |
|
Amount vired (to) / from Hardship Fund |
(79) | (53) |
|
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. An amount of £327,000 was received in 2020/21 but relates to financial year 2021/22, and therefore remained unspent at 31 July 2021.
