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Notes to the financial statements

NOTES TO THE FINANCIAL STATEMENTS

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1. TUITION FEES AND EDUCATION CONTRACTS��(consolidated and university) ��	2019/20	2018/19
Scottish higher education students	5,708	5,858
Rest of UK students	1,016	1,040
European Union (excluding UK) students	2,881	2,585
Non-European Union students	2,326	2,582
Other fees and discounts	(363)	(337)
Education contracts	2,350	2,195
��	13,918	13,923
��	13,918	13,923
2. SCOTTISH FUNDING COUNCIL GRANTS��(consolidated and university)	2019/20	2018/19
Recurrent grant	��	��
Teaching	13,517	12,558
Research	1,108	1,174
Specific grants	��	��
Wider access retention funding	597	597
Other Specific Grants	64	219
Disabled students premium	57	54
Knowledge exchange / University Innovation Fund	385	534
Scottish Drama Training Network	293	148
Capital maintenance grant released	344	359
Other miscellaneous grants	157	-
Deferred capital grants released (note16)	��	��
Land & buildings	649	528
Equipment	-	-
��	17,171	16,171

��

RESEARCH AND KNOWLEDGE EXCHANGE INCOME ��	Consolidated 2019/20	Consolidated 2018/19	University 2019/20	University 2019/20
UK private sector	5	7	-	-
UK government and health authorities	1,729	1,497	1,729	1,484
UK private sector	5	7	-	-
European funding	110	81	108	��
Other grants & contracts	126	236	126	239
��	2,421	2,192	2,404	2,167

��

4. OTHER OPERATING INCOME	Consolidated 2019/20 £000	Consolidated 2018/19 £000	University 2019/20 £000	University 2018/19 £000
Residences, catering and conferences	3,872	5,250	3,602	4,884
Other services rendered	505	829	331	469
Sports centre income	148	223	148	223
Released from deferred capital grants (note 16)	-	-	-	-
Other income	2,007	540	2,227	887
��	6,532	6,842	6,308	6,463

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5. INVESTMENT INCOME	Consolidated 2019/20 £000	Consolidated 2018/19 £000	University 2019/20 £000	University 2019/20 £000
Investment income on endowments	-	-	-	-
Other investment income	56	85	55	84
Net return on pension scheme	-	-	-	-
��	56	85	55	84
Other investment income	56	85	55	84

��

6. DONATIONS AND ENDOWMENTS��(consolidated and university)	2019/20 £000	2018/19 £000
New endowments	-	-
Unrestricted donations	339	305
��	339	305

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7. STAFF COSTS	Consolidated 2019/20 £000	Consolidated 2018/19 £000	University 2019/20 £000	�� University 2018/19 £000 ��
Wages and salaries	17,300	17,855	17,236	17,710
Restructuring	-	1,101	-	1,101
Social security costs	1,795	1,923	1,795	1,923
Movement on USS provision	(359)	698	(359)	698
Other pension costs	4,417	5,135	4,417	5,135
��	23,153	26,712	23,089	26,567

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Emoluments of the Principal and Vice-Chancellor	2019/20 £000	2018/19 £000
Professor Petra Wend	��	��
Salary	-	215
Employers’ pension contributions	-	-
In lieu of employers’ pension contribution	-	32
Benefits in kind	-	2
Total	-	249
Dr Richard Butt (Acting Principal from 1 August 2019 to 30 September 2019)	��	��
Salary	23	-
Employers’ pension contributions	5	-
Benefits in kind	-	-
Total	28	-
Sir Paul Grice (from 1 October 2019)	��	��
Salary	166	-
Employers’ pension contributions	23	-
In lieu of employers’ pension contribution	9	-
Benefits in kind	-	-
Total	198	-

Sir Paul Grice was the highest paid member of the University Court.

7. STAFF COSTS (continued)

Professor Wend retired on 31 July 2019, and had opted out of the pension scheme. 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 is 4.95 times��the median pay of staff (2018/19 : 5.27 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 2020 (including any employers’ pension contributions) was £916,919 (year ended 31 July��2019, £937,778).

University Court members

The University Court members are the trustees for charitable law purposes and are also the directors of the��company limited by guarantee for company law purposes. Due to the nature of the University’s operations and the composition of the University Court (being drawn from local public and private sector organisations), it is inevitable��that transactions will take place with organisations in which a member of the University Court may have an interest.��All transactions involving organisations in which a member of the University Court may have an interest are��conducted at arm’s length, and in accordance with the University’s financial regulations and normal procurement��procedures. University Court members receive no remuneration in respect of their duties as members of the��University Court. A number of members of the University Court, including the Principal and Vice-Chancellor,��receive a salary in respect of their employment with the University. Detail of such remuneration is set out below.

University Court members	2019/20 �� £000	2018/19 (restated) �� £000
Directors’ emoluments (including pension contributions)	��	��
Fees for services as members of University Court	-	-
Emoluments (i.e. salaries as members of staff)	416	467
Contributions paid to pension schemes	75	38
Benefits in kind	-	2
Total	491	507

These figures relate to 7 members of staff, including the Principal (2018/19:6)

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:-

Members��	2019/20	2018/19
��	Number	Number
Senior post holders	��	��
£100,001 to £110,000	2	2
£110,001 to £120,000	-	1
£120,001 to £130,000	1	-
£170,001 to £180,000	1	-
£240,001 to £250,000	-	1

No compensation payments were made to senior post holders in respect loss of office (2018/19: Nil).

Members	2019/20	2018/19
Average full time equivalent (FTE) staff numbers by major category:	FTE number	FTE number
(Consolidated and university)	��	��
Academic schools	182	194
Academic services	44	43
Research grants & contracts	37	33
Residences, catering & conferences	16	26
Premises	23	21
Administration & central services	108	108
��	410	425

INTEREST PAYABLE	2019/20 £000	2018/19 £000	2019/20 £000	2018/19 £000
Low Interest	1,187	1,246	1,187	1,246
Finance lease interest	-	-	-	-
Net charge on pension scheme	361	186	361	186
��	1,548	1,432	1,548	1,432
��	��	��	��	��
9. ANALYSIS OF TOTAL EXPENDITURE BY ACTIVITY	Consolidated 2019/20 £000	Consolidated 2018/19 £000	University 2019/20 £000	University 2018/19 £000
Academic schools	13,528	14,197	13,887	14,197
Academic services	4,271	5,177	4,271	5,177
Research grants & contracts	1,683	1,900	1,665	1,884
Other services rendered	680	508	507	236
Residences, catering and conferences	2,209	3,110	2,172	3,002
Premises	7,514	8,096	7,514	8,096
Administration & central services	9,657	7,845	9,284	7,836
Other expenses	1,374	4,729	1,374	4,729
Total per income and expenditure account	40,916	45,562	40,674	45,157
��	��	��	��	��
10. TAXATION (consolidated and university)	��-	-��	2019/20 £000	2018/19 £000
UK Corporation Tax payable	��	��	-	-
��	��	��	��	��
11. OTHER OPERATING EXPENSES	Consolidated ��2019/20 £000	Consolidated 2018/19 £000	University ��2019/20 £000	University 2018/19 £000
External auditors – audit fees	112	71	100	66
External auditors – non-audit fees	2	-	-	-
Internal audit	31	44	31	44
Grants to QMU Students Union	252	240	252	240
Other expenses	10,504	11,328	10,340	11,073
��	10,901	11,683	10,723	11,423
��	��	��	��	��
12. TANGIBLE ASSETS��(Consolidated and University) Cost or valuation:	Freehold��land &��buildings Owned £000	Fixtures, fittings & equipment Owned £000	Fixtures, fittings & equipment Held under��finance leases £000	TOTAL £000
At 1 August 2019	129,907	9,704	1,271	140,882
Disposals at cost	-	(14)	-	(14)
Additions at cost	-	940	-	940
Revaluation of buildings	(2,759)	-	-	(2,759)
At 31 July 2020	127,148	10,630	1,271	139,049
Depreciation:	��	��	��	��
At 1 August 2019	3,462	8,188	1,271	12,921
Written off on disposals	-	(14)	-	(14)
Written back due to revaluation	(7,927)	-	-	(7,927)
Provided during the year	4,465	849	-	5,314
At 31 July 2020	-	9,023	1,271	10,294
Net book amount at 31 July 2020	127,148	1,607	-	128,755
Net book amount at 1 August 2019	126,445	1,516	-	127,961
Analysis of net book amount at 31��July 2020	��	��	��	��
Financed by capital grant	7,558	-	-	7,558
Other	119,590	1,607	-	121,197
��	127,148	1,607	-	128,755
Provided during the year	4,465	849	-	5,314
At 31 July 2020	-	9,023	1,271	10,294
Net book amount at 31 July 2020	127,148	1,607	-	128,755

The valuation of the academic estate was carried out at 31 July 2020 by Gerald Eve, Chartered Surveyors.��The basis of the valuation, which was carried out in accordance with guidelines issued by the Royal Institution��of Chartered Surveyors, is depreciated replacement cost. The student accommodation was valued as at 31��July 2020, also by Gerald Eve LLP. This valuation was prepared in accordance with the requirements of the��RICS Valuation - Global Standards (July 2017 edition) and Financial Reporting Standard 102 and the 2019��Statement of Recommended Practice 'Accounting for Further and Higher Education'. The valuation was��undertaken on a Fair Value basis, equated to Market Value on the assumption of a continuation of the existing��use. The valuations are subject to a material valuation uncertainty, arising as a result of the COVID-19��pandemic. Further detail is provided in paragraph (N) in the Statement of Principal Accounting Policies.��

Barclays Bank plc holds a standard security, dated 17 December 2014, over the student accommodation��situated on the University campus.

The University has a modest collection of works of art and other items of historical interest. No value is��included within fixed assets in respect of this collection as it is not considered to be material.

13. INVESTMENTS Subsidiary Undertaking Name of undertaking	Country of��incorporation��and��registration	Description of shares held	Proportion of��nominal value of shares held %	Cost at 1��August 2019 &��31 July 2020 £
QMU Enterprises Ltd Scotland	Scotland	Ordinary £1 shares	100	100
��	��	��	��	100

QMU 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 QMU Enterprises Limited have been consolidated into the group financial statements.

14. TRADE AND OTHER RECEIVABLES	Consolidated	Consolidated	University	University
Amounts falling due within one year:	2020	2019	2020	2019
��	£000	£000	£000	£000
Trade debtors	246	858	243	677
Prepayments and accrued income	2,276	851	2,276	784
Amounts due from subsidiary company	-	-	463	364
��	2,522	1,709	2,982	1,825
15. CREDITORS: AMOUNTS FALLING��DUE WITHIN ONE YEAR	Consolidated 2020	Consolidated 2019	University 2020	University 2019
Secured loans (see note 16)	1,492	1,492	1,492	1,492
Trade creditors	1,197	1,886	1,192	1,885
Social security and other taxation payable	494	568	494	568
Accruals and deferred income	4,058	4,238	4,003	4,027
Unsecured loans	31	35	31	35
��	7,272	8,219	7,212	8,007

The secured long-term loan facility with Barclays Bank plc is £29.1 million, and has a final maturity date of 17��December 2024. The loan is secured over part of the campus site at Musselburgh. The University has entered��into a fixed-rate arrangement in order to protect itself against any significant fluctuations in interest rates. The��terms of this arrangement are commercially confidential.

Pensions��£’000	Obligation to��fund deficit on��USS Pension	Pension��enhancements	Defined benefit��obligations��LGPS	Total��pensions��provisions
��	£’000	£’000	£’000	£’000
At 1 August 2019	1,080	3,011	15,325	15,325
Utilised in year	(28)	(216)	-	(244)
Transfer (to)/from income &��expenditure account	(309)	51	15,659	15,401
At 31 July 2020	743	2,846	30,984	34,573

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 2020, 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 Unrestricted £000	Consolidated and University Restricted Expendable £000	Consolidated and University Restricted Permanent £000	Consolidated and University Restricted Total £000	Consolidated and University Total £000
Balance at 1 August 2019	-	595	47	642	642
Income for year	-	339	-	339	339
Expenditure for year	-	(160)	-	(160)	(160)
At 31 July 2020	-	774	47	821	821
Represented by:	��	��	��	��	��
Capital value	-	-	35	35	35
Accumulated income	-	774	12	786	786
��	-	774	47	821	821
19. REVALUATION RESERVE	��-	-��	-��	Consolidated and University 2020 £000	Consolidated and University 2019 £000
At 1 August	��	��	��	61,412	31,132
Revaluation Gains	��	��	��	5,168	30,614
Release to general reserve - (334)	��	��	��	-	(334)
At 31 July	��	��	��	66,580	61,412
20. CONSOLIDATED RECONCILIATION OF NET DEBT	-	��-	��-	Consolidated and University 2020 £000	Consolidated and University 2019 £000
Consolidated��and University	��	��	��	£000	��
Net debt at 1 August 2019	��	��	��	22,656	��
Increase in cash and bank balances	��	��	��	(690)	��
Secured loans repaid	��	��	��	(1,491)	��-
Unsecured loans repaid	��	��	��	(31)	��
Net debt at 31 July 2020	��	��	��	20,444	��
Analysis of net debt	��-	-��	-��	Consolidated and��University 2022 £000	Consolidated and��University 2019 £000
Cash at bank and in hand	��	��	��	(8,772)	(8,082)
Borrowings: amounts falling due within one year	��	��	��	��	��
Secured loans	��	��	��	1,492	1,492
Unsecured loans	��	��	��	31	35
��	��	��	��	1,523	1,527
Borrowings: amounts falling due after more than one year	��	��	��	��	��
Secured loans	��	��	��	27,595	29,086
Unsecured loans	��	��	��	98	125
��	��	��	��	27,693	29,211
Net debt as at 31 July��	��	��	��	20,444	22,656
��	��	��	��	1,523	1,527

21. 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 £4,058,000 (2018/19: £5,833,000).

PENSIONS AND SIMILAR OBLIGATIONS	Consolidated and University Year ended��31 July 2020 £000	Consolidated and University Year ended��31 July 2019 £000
The total pension charge is analysed as follows:	��	��
Lothian Pension Fund (LGPS)	2,243	3,211
Scottish Teachers’ Pension Scheme	1,823	1,642
Universities Superannuation Scheme	(8)	980
��	4,058	5,833

Estimated employers’ pension contributions for the year to 31 July 2021 are £3,898,000.

A) Local Government Pension Scheme (LGPS)

The Lothian Pension Fund is a funded multi-employer defined benefit scheme, with the assets held in a��separate trustee-administered fund to meet long-term pension liabilities to past and present employees. The��trustees of the fund are required to act in the best interests of the fund’s beneficiaries. The appointment of��trustees to the fund is determined by the scheme’s trust documentation. The trustees are responsible for��setting the investment strategy for the scheme after consultation with professional advisors.

The following information is based upon a full actuarial valuation of the fund at 31 March 2017 updated to 31��July 2020 by a qualified independent actuary, Hymans Robertson LLP.

Assumptions at	31 July 2020	31 July 2019	31 July 2018
Pension increase rate	2.2%	2.4%	2.4%
Salary increase rate	3.9%	4.1%	4.1%
Discount rate	1.4%	2.1%	2.8%

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 increased from 19.5% to 20.0% with effect from 1 April 2020..

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 2020 No. of years	31 July 2019 No. of years
Males	21.7	21.7
Females	24.3	24.3
Future pensioners	��	��
Males	24.7	24.7
Females	27.5	27.5

21. PENSIONS AND SIMILAR OBLIGATIONS (continued)

A) Local Government Pension Scheme (LGPS) (continued)

Analysis of the amount shown in the balance sheet

PENSIONS AND SIMILAR OBLIGATIONS	Value at��31 July��2020 £000	Value at��31 July��2019 £000	Value at��31 July��2018 £000	Value at��31 July��2017 £000	Value at��31 July��2016 £000
Estimated employer assets (A)	60,469	63,223	57,343	57,322	50,644
Present value of scheme liabilities	(90,773)	(77,851)	(62,495)	(68,492)	(63,303)
Present value of unfunded liabilities	(680)	(697)	(671)	(701)	(769)
Total value of liabilities (B)	(91,453)	(78,548)	(63,166)	(69,193)	(64,072)
Net pension liability (A) – (B)	(30,984)	(15,325)	(5,823)	(11,871)	(13,428)
Analysis of movements in the present value of the scheme liabilities	-	-	-	31 July 2020 £000	31 July 2019 £000
Opening defined benefit obligation	��	��	��	78,548	63,166
Current service cost	��	��	��	3,018	2,276
Interest cost on defined benefit obligation	��	��	��	1,672	1,789
Contributions by members	��	��	��	429	437
Actuarial losses / (gains)	��	��	��	9,071	11,019
Past service costs	��	��	��	21	1,074
Unfunded benefits paid	��	��	��	(47)	(49)
Benefits paid	��	��	��	(1,259)	(1,164)
Closing defined benefit obligation	��	��	��	91,453	78,548

��

Analysis of movement in the market value of the scheme assets	31 July 2020 £000	31 July 2019 £000
Opening fair value of employer assets	63,223	57,343
Expected return on assets	(4,652)	3,660
Contributions by members	429	437
Contributions by employer	1,394	1,334
Contributions in respect of unfunded benefits	47	49
Interest income on plan assets	1,334	1,613
Unfunded benefits paid	(47)	(49)
Benefits paid	(1,259)	(1,164)
Closing fair value of employer assets	60,469	63,223

��

The significant increase in the net pension liability at 31 July 2020 compared with the position at 31 July 2019��is in line with the experience of all LGPS employers. There are two main reasons for this increase.

1. For all LGPS funds, investment returns have been extremely volatile over the latter part of the period as��a result of the COVID-19 pandemic, and whilst for many funds the significant asset losses experienced��in the first quarter of 2020 have been partially recovered in the period to the end of July, closing asset��values still show a reduction from the 2019 position.
2. The default financial assumptions at 31 July 2020 result in a significantly lower net discount rate��compared to 31 July 2019, mainly arising from a fall in AA corporate bond yields. This serves to increase��significantly the value placed on past service obligations.

A) Local Government Pension Scheme (LGPS) (continued)

Guaranteed minimum pension (GMP) was accrued by members of the Local Government Pension Scheme��(LGPS) between 6 April 1978 and 5 April 1997. The value of GMP is inherently unequal between males and��females for a number of reasons, including a higher retirement age for men and GMP accruing at a faster rate��for women. However overall equality of benefits was achieved for public service schemes through the��interaction between scheme pensions and the Second State Pension. The introduction of the new Single��State Pension in April 2016 disrupted this arrangement and brought uncertainty over the ongoing indexation��of GMPs, which could lead to inequalities between men and women’s benefits. As an interim solution to avoid��this problem, GMP rules were changed so that the responsibility for ensuring GMPs kept pace with inflation��passed in full to pension schemes themselves for members reaching state pension age between 6 April 2016��and 5 April 2021. This new responsibility led to increased costs for schemes (including the LGPS) and hence��for scheme employers. In calculating the level of provision for inclusion in the financial statements at 31 July��2019, the fund’s actuary carried out calculations in order to estimate the impact that the GMP indexation��changes would have on the liabilities of Queen Margaret University for financial reporting purposes. This��increased liability was reflected in the provision shown in the financial statements at 31 July 2019 as a past��service cost, and this element has been rolled forward and is included in the provision as at 31 July 2020 on��the same basis.

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. In the 2019 financial statements, the University included an additional provision to reflect the potential��additional costs arising out of these court decisions. Subsequently, the Scottish Public Pensions Agency��(SPPA) has issued proposals to amend the LGPS underpin to address the age discrimination included in��scheme reform. The proposal is that only members who were active in the LGPS at both 31 March 2013 and��1 April 2015 would be eligible for the benefit underpin. The impact of these restricted eligibility criteria is that��the adjustment applied to liabilities will be lower than previously expected, and this updated position has been��reflected in the calculation of the provision as at 31 July 2020. In calculating the amount of the provision at 31��July 2020, the assumptions used in calculating the McCloud element of the liability have been refined based��on the most recent data available. This has led to an increase in the liability and the expense of £275,000.

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.

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.��The cost cap will be reconsidered once the final decision on a remedy and how this affects the Scottish��Teachers’ Pension Scheme is known and its impact fully assessed in relation to any additional costs to 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. 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 is underway but not yet complete.

Since the University cannot identify its share of the assets and liabilities in the Retirement Income Builder��section of the scheme, the following disclosures reflect those relevant for the section as a whole.

The 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%��Years 11-20: CPI + 2.52% reducing linearly to CPI + 1.55 by year 21��Years 21 +: CPI + 1.55%

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 2018 actuarial valuation. The mortality��assumptions used in these figures are as follows:-

Mortality base table	Pre-retirement:�� 71% of AMC00 (duration 0) for males and 112% of AFC00 (duration 0)��for females
Post retirement: 97.6% of SAPS S1NMA “light” for males and 102.7% of RFV00 for��females
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:

retirement at age 65 are	2018��valuation	2017��valuation
Males currently aged 65 (years)	24.4 24.6	24.6
Females currently aged 65 (years)	25.9	26.1
Males currently aged 45 (years)	26.3	26.6
Females currently aged 45 (years)	27.7	27.9

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 2020 deficit recovery liability reflects this plan. The liability figures have been produced using the following��assumptions:

%	2020	2019
Discount rate	0.73%	2.44%
Pension increases (CPI)	2.00%	2.11%

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 2020 on the basis of valuation prescribed by FRS 102. The total provision in��respect of this liability is £2.846 million (2019: £3.011 million).

22. POST BALANCE SHEET EVENT

In September 2020, the Trustee of the USS Pension Scheme (USS) launched a consultation with Universities��UK on key aspects of the scheme's 2020 valuation. The scope of this exercise covers a wide range of potential��outcomes - reflecting issues still to be resolved on employer support as well as uncertainties for the higher��education sector and financial markets in general - but, based on the proposals put forward, the Trustees��have indicated that the fund's deficit at 31 March 2020 could range from between £9.8bn and £17.9bn. This��would represent a significant deterioration from the £3.6bn deficit established under the 2018 valuation (and against which the current recovery plan is set) and a return to the levels of shortfall experienced under the��previous 2017 valuation (£11.8bn).

At this stage no outcome has been agreed and the USS Trustee has until 30 June 2021 to conclude the��valuation. As an early indication of the scale of impact, it has been estimated that the cost of continuing to��offer current benefits in this context could reach between 40.8% to 67.9% of payroll. However, this range is��purely an illustration and is before any other measures are considered to reduce the deficit. This matter is still��being widely debated across the sector and by the Trustee of the Pension Scheme. For the 2019-20 financial��year, however, this is considered a non-adjusting event.

23. 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.

24. HARDSHIP AND CHILDCARE FUNDS

HARDSHIP AND CHILDCARE FUNDS	2019/20 £000	2018/19 £000
HARDSHIP FUND (undergraduate and postgraduate)	��	��
Balance at 1 August	-	-
Amounts received from Student Awards Agency for Scotland	261	232
Amount vired (to) /from Childcare Fund	53	50
��	314	282
Disbursed to students	(313)	(278)
Other costs	(1)	(3)
Refunded to Student Awards Agency for Scotland	-	(1)
Balance unspent at 31 July	-	-
CHILDCARE FUND	��	��
Balance at 1 August��	-	-
Amounts received from Student Awards Agency for Scotland	149	140
��	149	140
Disbursed to students	(96)	(90)
Amount vired (to) / from Hardship Fund	(53)	(50)
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.