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QMU Strategic Report and Financial Statements 2022 - Notes to the Financial Statements

Notes to the Financial Statements

1 Tuition Fees & Education Contracts (consolidated and university)	2021/22	2020/21
	£000	£000
Scotland home domicile fees	7,735	6,504
European Union domicile fees	2,163	2,564
Rest of UK domicile fees	1,971	1,560
Non-European Union domicile fees	3,545	2,473
Other non-credit bearing course fees and discounts	(576)	(355)
Education contracts	2,265	2,312
	17,103	15,058

 

2 Scottish Funding Council Grants (consolidated and university)	2021/22	2020/21
Recurrent grant
General Fund – Teaching	16,308	15,762
General Fund – Research and Innovation	1,846	1,865
Specific grants
Other grants – COVID support grants	-	1,110
Capital maintenance grants	972	853
Ring-fenced grants funded by Scottish Government	1,831	853
Deferred capital grants released (note16)	649	649
	21,606	20,707

 

3 Research Grants & Contracts	Consolidated 2021/22 £000	Consolidated 2020/21 £000	University  2021/22 £000	University 2022/21 £000
Research councils	205	210	205	210
UK based charities	177	137	177	118
UK government and health authorities	1,784	2,225	1,376	2,067
European funding	400	325	386	325
Other grants & contracts	205	89	205	89
	2,771	2,986	2,349	2,809

 

4 Other Operating Income	Consolidated 2021/22 £000	Consolidated 2020/21 £000	University  2021/22 £000	University 2022/21 £000
Residences, catering and conferences	5,028	3,541	4,789	3,495
Other services rendered	216	387	65	79
Sport Centre income	182	59	182	59
Coronavirus Job Retention Scheme income	-	91	-	91
Other Income	970	721	1,127	749
	6,396	4,799	6,163	4,473

 

5 Investment Income	Consolidated 2021/22	Consolidated 2020/21	University  2021/22	University 2022/21
Other investment income	72	15	71	15
Total	72	15	71	15

 

6 Donations & Endowments	2021/22	2020/21
(consolidated and university)	£000	£000
Unrestricted donations	369	466
Total	369	466

 

7 Staff Costs	Consolidated 2021/22 £000	Consolidated 2020/21 £000	University  2021/22 £000	University 2022/21 £000
Wages and salaries	19,555	18,800	19,318	18,628
Social security costs	2,081	1,919	2,081	1,917
Movement on USS provision	1,117	(29)	1,117	(29)
Other pension costs	6,463	6,278	6,463	6,277
	29,216	26,968	28,978	26,793

 

Emoluments of the Principal and Vice-Chancellor	2021/22	2020/21
Sir Paul Grice
Salary*	203	176*
Employers’ pension contributions	-	-
In lieu of employers’ pension contribution	35	35
	238	211

*  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

The head of the University’s basic salary is 5.65 times the median pay of staff (2020/21 : 5.16 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 2022 (including any employers’ pension contributions) was £967,263 (year ended 31 July 2021, £922,575).

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.

7. Staff Costs	2021/22 £000	2020/21- Restated £000
Directors’ emoluments (including pension contributions)
Fees for services as members of University Court	15	5
Emoluments (i.e. salaries as members of staff)	574	541
Contributions paid to pension schemes	78	74
Total	667	620

These figures relate to 9 members of staff, including the Principal (2020/21 : 8)  

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	2021/22	2020/21
£100,001 to £110,000	2	2
£120,001 to £130,000	1	1
£210,001 to £220,000	-	1
£230,001 to £240,000	1	-

No compensation payments were made to senior post holders in respect loss of office (2020/21: Nil).

Average full time equivalent (FTE) staff numbers by major category: (Consolidated and university)	2021/22 - FTE Numbers	2020/21 - FTE Numbers
Academic schools	205	202
Academic services	61	53
Research grants & contracts	32	31
Residences, catering & conferences	17	15
Premises	27	25
Administration & central services	115	114
Total	457	440

 

8 Interest Payable & Other Finance Costs	Consolidated 2021/22 £000	Consolidated 2020/21 £000	University  2021/22 £000	University 2020/21 £000
Loan interest	1,000	1,090	1,000	1,090
Net charge on pension scheme	366	455	366	455
Total	1,366	1,545	1,366	1,545

 

9 Analysis of Total Expenditure by Activity	Consolidated 2021/22 £000	Consolidated 2020/21 £000	University  2021/22 £000	University 2020/21 £000
Academic schools	15,471	14,827	15,471	14,827
Academic services	4,893	4,351	4,893	4,351
Research grants & contracts	2,771	2,335	2,348	2,265
Other services rendered	216	495	65	79
Residences, catering and conferences	3,138	2,444	3,075	2,444
Premises	8,023	6,949	8,023	6,949
Administration & central services	9,655	8,832	9,636	8,815
Other expenses	4,556	5,649	9,636	8,815
Total	48,723	45,882	48,067	45,379

 

Other Operating Expenses	Consolidated 2021/22 £000	Consolidated 2020/21 £000	University  2021/22 £000	University 2020/21 £000
External auditors – audit fees	139	101	123	87
External auditors – non-audit fees	3	-	-	-
Internal audit	44	22	44	22
Grants to QMU Students’ Union	274	261	274	261
Other expenses	12,869	11,914	12,469	11,600
Total	13,329	12,298	12,910	11,970

 

11 Intangible Assets Consolidated and University	Date	£000
Cost or Valuation:
	At 1 August  2021	-
	Additions at cost	595
	At 31 July 2022	595
Amortisation:
	At 1 August 2021
	Provided during the year	66
	At 31 July 2022
Net book amount at 31 July 2022		529

 

12 Tangible Assets Consolidated and University	Freehold land & Buildings £000	Fixtures, fittings & equipment £000	Total £000
Cost or Valuation :
At 1 August  2021	122,736	11,991	134,727
Disposals at cost	-	(3,190)	(3,190)
Additions at cost	-	224	224
Revaluation of buildings	10,189	-	10,189
At 31 July 2022	132,925	9,025	141,950
Depreciation:
At 1 August 2021	-	11,089	11,089
Written off on disposal	-	(3,190)	(3,190)
Written back due to revaluation	(4,267)	-	(4,267)
Provided during the year	4,267	479	4,746
At 31 July 2022	-	8,387	8,387
Net book amount at 31 July 2022	132,925	638	133,563
Net book amount at 1 August 2021	122,736	893	123,629
Analysis of net book amount at 31 July 2022
Financed by capital grant	6,260	-	6,260
Other	126,665	648	127,303
	132,925	735	133,563

The heritable properties comprising Queen Margaret University’s property estate were valued as at 31 July 2022 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 2022 £	Cost at 1 August 2021 £
QMU Enterprises Ltd	Scotland	Ordinary £1 shares	100	100	100
		Ordinary £1 shares	50	1	-
				101	100

 

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 Amounts falling due within one year:	Consolidated 2021/22 £000	Consolidated 2020/21 £000	University  2021/22 £000	University 2020/21 £000
Trade debtors	661	658	573	454
Prepayments and accrued income	936	1,097	934	1,086
Amounts due from subsidiary company	-	-	375	243
Amounts due from joint venture	125	-	125	-
Total	1,722	1,755	2,007	1,783

 

15 Creditors: Amounts Falling due within 1 Year	Consolidated 2022 £000	Consolidated Restated 2021 £000	University  2022 £000	University Restated 2021 £000
Secured loans (see note 16)	1,343	1,343	1,343	1,343
Trade creditors	1,433	1,220	1,431	1,206
Social security and other taxation payable	687	587	687	587
Accruals and deferred income	5,663	6,438	5,376	6,253
Unsecured loans	168	186	168	186
Deferred capital grants (see note 16)	649	649	649	649
Total	9,934	10,423	9,645	10,224

 

16.Creditor: Amounts Falling due after more than 1 Year	Consolidated 2022 £000	University Restated 2021 £000
Secured loans	17,151	23,493
Unsecured loans	2,534	2,702
Deferred capital grants	5,611	6,260
	25,296	32,455
Analysis of secured loans:-
Due between one and two years	1,343	1,343
Due between two and five years	15,808	22,150
Due in five years or more	-	-
Total due after more than one year	17,151	23,493
Due within one year (note 15)	1,343	1,343
Total secured loans	18,494	24,836
Analysis of unsecured loans:-
Due between one and two years	168	168
Due between two and five years	474	493
Due in five years or more	1,892	2,041
Total due after more than one year	2,534	2,702
Due within one year (note 15)	168	186
Total unsecured loans	2,702	2,888
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	3,015	3,664
Total due after more than one year	5,611	6,260
Due within one year (note 15)	646	649
Total Deferred capital grants	6,260	6,909

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 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. 

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. The remaining loan of £54k is repayable over a period of three years.

Deferred capital grants due to be released within one year are included within Creditors : amounts falling due within one year. The deferred capital grants figure at 31 July 2021 has been restated to reflect this.

17. Provisions for Liabilities Consolidated and University Pensions £'000	Obligation to fund deficit on USS Pension £,000	Pension enhancements £,000	Defined benefit obligations LGPS £,000	Total pensions provisions £,000
At 1 August 2021	719	2,604	21,090	24,413
Utilised in year	(45)	(203)	-	(248)
Transfer (to)/from income & expenditure account	1,168	(328)	(21,090)	(20,250)
At 31 July 2022	1,842	2,073	-	3,915

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 2022, 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 2021	1,001	47	1,048
Income for year	369	-	369
Expenditure for year	(198)	-	(198)
At 31 July 2022	1,172	47	1,219
Represented by:
Capital value	-	35	35
Accumulated income	1,172	12	1,184
	1,172	47	1,219

 

19 Revaluation Reserve	Consolidated   2022 £000	University  2021 £000
At 1 August	66,435	66,580
Expenditure for year	(198)	-
Revaluation (losses) /gains	14,456	(145)
Release to general reserve	-	-
At 31 July	80,891	66,435

 

20 Consolidated Reconciliation of Net Debt Consolidated and University	£000
Net debt at 1 August 2021	12,117
Decrease in cash and bank balances	363
Secured loans repaid	(6,341)
Unsecured loans repaid	(187)
Net debt at 31 July 2022	5,952

 

Analysis of net debt	Consolidated	University
	2022	2021
	£000	£000
Cash at bank and in hand	(15,244)	(15,607)
Borrowings : amounts falling due within one year
Secured loans	1,343	1,343
Unsecured loans repaid	168	168
	1,511	1,529
Borrowings : amounts falling due after more than one year
Secured loans	17,151	23,494
Unsecured loans	2,543	2,702
	19,685	26,195
Net debt as at 31 July	5,952	12,117

 

21 Pensions and Similar Obligations	Consolidated	University
	Year ended 31 July 2022	Year ended 31 July 2021
The total pension charge is analysed as follows:-	£000	£000
Lothian Pension Fund (LGPS)	4,192	3,860
Scottish Teachers’ Pension Scheme	1,882	2,059
Universities Superannuation Scheme	1,506	330
	7,580	6,249

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).  

Estimated employers’ pension contributions for the year to 31 July 2023 are £4,342,000. Actual employers’ pension contributions in the year to 31 July 2022 were £4,033,000.

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 2022 by a qualified independent actuary, Hymans Robertson LLP.

Assumptions at	31 July 2022	31 July 2021	31 July 2020
Pension increase rate	2.75%	2.85%	2.20%
Salary increase rate	3.25%	3.35%	3.90%
Discount rate	3.50%	1.60%	1.40%

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:-

21 Pensions and Similar Obligations (continued)	Consolidated	University
Current pensioners	Year ended 31 July 2022	Year ended 31 July 2021
Male	20.3	20.5
Females	23.1	23.3
Future pensioners (assumed aged 45 at last formal revaluation date)		2,059
Male	21.6	21.9
Females	25.0	25.2

 

21 Pensions and Similar Obligations (continued) A) Local Government Pension Scheme (LGPS) (continued) Analysis of the amount shown in the balance sheet	Value at 31 July 2022 £000	Value at 31 July 2021 £000	Value at 31 July 2020 £000	Value at 31 July 2019 £000	Value at 31 July 2018 £000
Estimated employer assets (A)	74,429	69,844	60,469	63,223	57,343
Present value of scheme liabilities	(65,388)	(90,361)	(90,773)	(77,851)	(62,495)
Present value of unfunded liabilities	(470)	(573)	(680)	(697)	(671)
Total value of liabilities (B)	(65,858)	(90,934)	(91,453)	(78,548)	(63,166)
Net pension asset/(liability)  (A) – (B)	*8,571	(21,090)	(30,984)	(15,325)	(5,823)

* 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. The University assessed the recoverability of the asset on this basis and determined that it was appropriate that the surplus at 31 July 2022 was not recognised, in line with the requirements of FRS 102. 

Analysis of movements in the present value of the scheme liabilities	31 July 2022	31 July 2021
	£000	£000
Opening defined benefit obligation	90,934	91,453
Current service cost	4,192	3,837
Interest cost on defined benefit obligation	1,479	1,298
Contributions by members	471	453
Actuarial losses / (gains)	(29,652)	(4,491)
Unfunded benefits paid	(43)	(43)
Benefits paid	(1,523)	(1,573)
Closing defined benefit obligation	65,858	90,934

 

Analysis of movement in the market value of the scheme assets	31 July 2022	31 July 2021
	£000	£000
Opening fair value of employer assets	69,844	60,469
Expected return on assets	3,082	8,696
Other experience	-	(444)
Contributions by members	471	453
Contributions by employer	1,453	1,395
Contributions in respect of unfunded benefits	43	43
Interest income on plan assets	1,120	848
Benefits paid	(1,523)	(1,573)
Closing fair value of employer assets	74,429	69,844

The significant move from a net pension liability at 31 July 2021 to a net asset at 31 July 2022 is due mainly to an increase in the net discount rate used to measure the university’s obligations, along with the use of a more up-to-date set of mortality assumptions and stronger than expected investment returns. The year-end liability is calculated to include an estimated uprating of current and deferred pension benefits in relation to the 2023 pension increase order for the scheme. This is based on RPI and CPI rates at August 2022, equating to 9.9%. The actual increase will be agreed in March 2023 and may be subject to change on finalisation. Any changes from the assumed rate will be accounted for as actuarial adjustments in future years.

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 2022. 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 2022. 

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 2022 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. 

B) Scottish Teachers’ Pension Scheme (STPS) (continued)

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 Statement of Funding Principles (uss.co.uk/about-us/valuation-and-funding/statement-of-funding-principles). 

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: Pre-retirement: 2.75% p.a. Post retirement: 1.00% p.a.

C) Universities Superannuation Scheme (USS) (continued)

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:-

Pension	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:	2022	2021
Males currently aged 65 (years)	23.9	24.7
Females currently aged 65 (years)	25.5	26.1
Males currently aged 45 (years)	25.9	26.7
Females currently aged 45 (years)	27.3	27.9

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:

%	2022	2021
Discount rate	3.31%	0.87%
Pensionable salary growth	3.00%	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 2022 on the basis of valuation prescribed by FRS 102. The total provision in respect of this liability is £2.073 million (2021: £2.604 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	2021/22 £000	2022/21 £000
HARDSHIP FUND (undergraduate and postgraduate)
Balance at 1 August	327	-
Amounts received from Student Awards Agency for Scotland	202	664
Interest received	1	-
Amount vired (to) /from Childcare Fund	67	79
	597	743
Disbursed to students	(597)	743
Other costs	(12)	-
Refunded to Student Awards Agency for Scotland	(6)	-
Balance unspent at 31 July	-	327
CHILDCARE FUND
Balance at 1 August	-	-
Amounts received from Student Awards Agency for Scotland	154	144
	154	144
Disbursed to students	(87)	(65)
Amount vired (to) / from Hardship Fund	(67)	(79)
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 related to financial year 2021/22, and therefore remained unspent at 31 July 2021 and was carried forward and disbursed in 2021/22.