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

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 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.

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.