Scottish Parliamentary Contributory
Pension Fund
Annual Accounts
2008-09
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
Contents
Page
Managers‟ Report
1
Report of the Actuary
6
Statement of Managers‟ Responsibilities
10
Statement on Internal Control
11
Independent Auditor‟s Report
13
Fund Account
15
Net Assets Statement
16
Notes to the Financial Statements
17
Account Direction
23
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Managers‟ Report
Background
1.
The Scottish Parliamentary Contributory Pension Fund (SPCPF) was set up from 6 May
1999 under transitional provisions of the Scotland Act 1998. The SPCPF provides for the
payment of pensions to former Members and Office Holders of the Scottish Parliament
and, subject to certain conditions, to their surviving partners and children.
2.
The Pension (Increase) Act 1971 and Section 59 of the Social Security Pensions Act 1975
(as amended) are applicable to pensions paid from the SPCPF.
3.
The legislation that governs the SPCPF is The Scotland Act 1998 (Transitory and
Transitional Provisions) (Scottish Parliamentary Pension Scheme) Order 1999 (S.I. 1999
No.1082) (“the 1999 Order”).
4.
Since 1999 there have been a number of significant legislative changes at a UK level which
have affected all pension schemes. The Finance Act 2004 and the Pensions Act 2004
transformed the tax and legal environment in which pensions operate in the UK,
necessitating changes to the pension scheme rules. The Parliament agreed on 27 June
2007 that, as a result of these legislative changes, a Scottish Parliamentary Pension
Scheme Committee should be established to develop proposals for new scheme rules for
consideration by Parliament. The Committee‟s report was debated and approved by the
Parliament on 26 June 2008. The Scottish Parliamentary Pensions Bill was then introduced
at Stage 1 on 26 September 2008. The Bill passed Stage 2 on 3 December 2008, Stage 3
on 22 January and received Royal Assent on 25 February 2009. The Scottish
Parliamentary Pensions Act 2009 was therefore established with the new scheme rules
coming into force from 1 September 2009. More information on the changes is contained
in paragraph 19 of the Managers‟ Report.
Management of Fund
5.
The Scottish Parliamentary Corporate Body (SPCB) are the managers of the SPCPF. The
members of the Corporate Body during the current financial year, appointed following votes
in the Scottish Parliament in 2007-08 at the start of the new session of Parliament, were:
Name
Appointed
Alex Fergusson MSP, Presiding Officer
14-May-2007
Alex Johnstone MSP
24-May-2007
Tricia Marwick MSP
24-May-2007
Tom McCabe MSP
24-May-2007
Mike Pringle MSP
24-May-2007
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Other parties appointed in connection with the SPCPF
6.
The following professional parties are appointed in connection with the SPCPF:
Responsibility
Name
Appointed by
Actuarial advice
Government Actuary Department
Schedule 1, 1999 Order
External auditor
Audit Scotland
Schedule 1, 1999 Order
Investment Management
Baillie Gifford
SPCB
Bankers
Bank of Scotland
SPCB
Scheme Administrator
Scottish Public Pensions Agency
SPCB
Legal Advice
Legal Advisor to the SPCB
SPCB
The Managers have also appointed officials from the Scottish Parliament, Human
Resources Office as their Secretariat.
The Scottish Parliamentary Contributory Pension Fund is an Inland Revenue registered
scheme for the purposes of the Finance Act 2004. This means that certain of the scheme‟s
income and chargeable gains are free of taxation.
Preparation of annual accounts
7.
The SPCPF is a public service pension scheme and as such exempt from the majority of
the requirements of the 1995 Pensions Act including those relating to accounts. However,
the accounts have been prepared, as far as appropriate, in accordance with the Statement
of Recommended Practice, Financial Reports of Pension Schemes issued in 2007, in order
to conform to best practice reporting requirements. A statement of the Managers‟
responsibilities with regard to the preparation of the accounts is on page 10. This includes
a comment that the financial statements have been prepared on a going concern basis.
Benefits payable
8.
The main provisions of the scheme are:
 an immediate pension of one fiftieth of final salary for each year of service on retirement
at age 65;
 an immediate pension on retirement at any time on the grounds of ill health;
 an abated pension paid on retirement at any time on attainment of age 50 and
completion of not less than 15 years service;
 a five eighths partners pension;
 childrens‟ pensions (at the rate of one quarter of the basic or prospective pension of the
Member if there is one child or three eighths if there are two or more children);
 a lump sum death gratuity on death in service equal to three years salary with provision
for more than one nominee;
 the purchase of added years;
 transfer of pension rights (into and out of the scheme);
 the opportunity to contribute to an in-house Additional Voluntary Contribution (AVC)
scheme.
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Scheme Membership
9.
As at 31 March 2009 the SPCPF consisted of 129 active MSP scheme members plus the
Lord Advocate and Solicitor General for Scotland. Of the 129 active MSP scheme
members 17 were also accruing additional benefits simultaneously in their capacity as
Office Holders. The qualifying Office Holder positions were 5 Cabinet Secretaries, 10
Ministers and 2 Deputy Presiding Officers. There were 43 deferred pensioners (former
pension scheme members who were not yet in receipt of a pension) and 22 pensions in
payment at the year end. Movement in the membership of the scheme during the year
included 1 new scheme member and 1 leaver (death in service). One deferred member
moved to become a pensioner.
Income
10.
Contributions income to the SPCPF is derived from two main sources (a) contributions
from Members of the Scottish Parliament and holders of qualifying office under article C2
(3) of the 1999 Order (SI 1999 No. 1082) and (b) contributions from the Scottish
Consolidated Fund paid under the terms of article D3 of the 1999 Order. Investment
income earned within the Baillie Gifford Fund is reinvested in the pooled fund.
In addition, transfers of pension benefits into the SPCPF amounted to £47,773 in 2008-09
(£65,334 in 2007-08).
11.
Members and qualifying office-holders contribute 6% of their salaries to the SPCPF. This
rate has been in effect since 7 May 1999. Pensions in respect of the offices of First Minister
and Presiding Officer are paid from the Scottish Consolidated Fund but the holders of
these offices contribute to the Pension Fund in respect of their MSP salaries. The
contribution from the Scottish Consolidated Fund has been 20.3% of salaries of members
and office holders from 1 April 2006. This will increase to 21% of salaries of members and
office holders from 1 April 2009.
Investment details and performance
12.
The Pensions Act 1995, Section 35, requires that the Trustees of pension funds prepare
and maintain a „Statement of Investment Principles‟. Whilst the SPCPF is statutorily
exempt from this requirement, the Managers have produced such a document through a
desire to comply with best practice for funded schemes. A copy of this is available on
request.
13.
The statement includes a policy on investment and explains that as this is a relatively new
scheme, contributions are likely to exceed benefits for many years. Accordingly, it should
not be necessary to sell assets to pay benefits in the medium term; this enables the
investment strategy to be predominantly equity based increasing the probability of a higher
investment return on the fund‟s assets over the long term. The risk of this type of
investment has been considered. The initial size of the scheme‟s assets are not sufficient
to allow a widely diverse portfolio and therefore it was decided to invest with a single
pooled fund run by an independent management company.
14.
The Managers delegated responsibility for the investment management of the SPCPF
entirely to Baillie Gifford. Custody of the investments, the receipt of income and the
recovery of tax remain the responsibility of the Managers.
15.
The 1999 Order requires the Managers of the Fund to review any acquisition or disposal of
the assets of the Fund within six months of such acquisition or disposal. Initially, until the
size of the Fund has become sufficiently large to allow investment directly into bonds,
stocks and shares, the Managers have decided to direct investment into a single pooled
fund, the Baillie Gifford Managed Pension Fund. Baillie Gifford‟s charge for investment
management and cost associated with the Fund is 0.53% per annum of the value of the
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Fund accrued on a daily basis. Baillie Gifford is required to manage the Fund‟s assets
within the parameters set by the Statement of Investment Principles and report the
performance of the Fund on a regular basis.
16.
Investing in the Baillie Gifford Managed Pension Fund began on 4 August 1999. In the
period 1 April 2008 to 31 March 2009 £2,090,350 was invested. This compares with
£1,969,208 invested in the period 1 April 2007 to 31 March 2008. At 31 March 2009 the
market value of the units held within the Fund was £17,126,545 (£19,495,256 on 31 March
2008). The comparative value of the units were £2.86 at 31 March 2002, £2.29 at 31
March 2003, £2.86 at 31 March 2004, £3.17 at 31 March 2005, £4.20 at 31 March 2006,
£4.36 at 31 March 2007, £4.32 at 31 March 2008 and £3.43 at 31 March 2009.
Actuarial position of the Fund
17.
The Government Actuary was required to produce an initial actuarial valuation of the
assets and liabilities of the SPCPF as at 6 May 1999 and thereafter to conduct a full
valuation at three yearly intervals. The last valuation dated 20 March 2009 covered the
period 1 April 2005 to 31 March 2008. It found that at the valuation date the value of the
assets of the SPCPF fell short of the value of the liabilities by £0.23 million. The
Government Actuary, at that review, increased the contribution rate equivalent to 20.3% of
salary to 21% from 1 April 2009.
18.
A Report of the Actuary for the period 1 April 2008 to 31 March 2009 can be found at
pages 6 to 9 of this Account.
Main changes to the Scheme Rules from 1 September 2009
19.
A number of significant changes were required to be made to the scheme rules by April
2011 in order to comply with primary legislation such as the Finance Act 2004 and the
Pensions Act 2004. The Scottish Parliamentary Pension Scheme Bill received Royal
Assent on 25 February 2009 and became the Scottish Parliamentary Pension Scheme Act.
Full details of the Act are available on the Scottish Parliament‟s web site .The main scheme
rule changes are as follows:
 Trustees and scheme administration - Appointment of Trustees to manage the scheme
rather than SPCB having the role of scheme Trustees.
 Provision for trustees to employ staff and advisers - e.g. scheme actuary, auditors,
pension legal expert and investment managers which are currently appointed by SPCB
 Scheme membership – participating membership of the pension scheme will no longer be
available to those age 75 and over.
 Revised pension arrangements for the First Minister and Presiding Officer – where
existing arrangements will be replaced with the same pension provisions as for all other
office-holders.
th
th
 Pension entitlement – option to accrual at 1/40 or 1/50 . The contribution rate for the
th
1/40 scheme will be 11% of salary for members.
 Early retirement – the minimum early retirement age will increase from 50 to 55. Also
removal of the qualifying period of 15 years service for early retirement thus opening up
early retirement to all members aged 55 and over regardless of age and service.
 Ill-health provision – a revised approach to ill health provision adopting a two tier
approach for serious ill-health and ordinary ill-health.
 Lump sum death benefits – death in service lump sum benefit increased from three to
four times salary.
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Contact address
20.
Further information and scheme documentation about the Scottish Parliamentary
Contributory Pension Fund, including members‟ own positions, can be obtained from The
Scottish Parliament, Human Resources Office, Edinburgh, EH99 1SP.
ALEX FERGUSSON MSP
Presiding Officer
Date: 29 October 2009
Approved on behalf of the Scottish Parliamentary Corporate Body as Managers of the Scottish
Parliamentary Contributory Pension Fund.
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Scottish Parliamentary Contributory Pension Fund
Report of the Actuary
Accounting Year ended 31 March 2009
1
1.1
2
2.1
Data
At the end of the accounting year 31 March 2009, there were 129 Members of the
Scottish Parliament (MSPs) accruing benefits under the Scottish Parliamentary
Pension Scheme and 19 Office Holders (including 2 Law Officers and 2 Deputy
Presiding Officers). Pensionable payroll for the financial year 2008/2009 was
approximately £7.7 million. There were 22 pensions in payment (including two
dependants) with an aggregate pension of approximately £148,500 per year and
43 deferred member and office holder pensioners as at 31 March 2009.
Liabilities
The capitalised value as at 31 March 2009 of expected future benefit payments
under the Scottish Parliamentary Contributory Pension Fund, for benefits accrued
in respect of employment prior to 31 March 2009, has been assessed using the
methodology and assumptions set out in Sections 4 and 5 below. The key
discount rate used for calculating liabilities at 31 March 2009 is 3.8%. The total
liability as at 31 March 2009 is £21.2 million.
2.2 Liability Movement
Liabilities of SPCPF at 31 March 2008
21.0
Current service cost (net of employee contributions)
1.8
Employee contributions
0.5
Past service costs
0.0
Interest on pension liabilities
1.5
Benefits paid
(0.1)
Actuarial loss (gain)
(3.5)
Liabilities of SPCPF at 31 March 2009
21.2
The actuarial gain can be further analysed as follows (all figures are shown in £m and as
a percentage of scheme liabilities as at 31 March 2009):
Experience loss arising
0.3
1.4%
Effect of change in discount rates
(3.8)
(17.8%)
Actuarial loss (gain)
(3.5)
(16.4%)
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Scottish Parliamentary Contributory Pension Fund
Report of the Actuary
3
3.1
Accruing Cost
The cost of benefits accruing for each year of service is met partly by a specified
contribution from members (6% of pay), with the Scottish Parliamentary
Corporation meeting the balance of the cost of the benefits. The total cost of
benefits accruing in the year 2008/2009 has been assessed using the
methodology and assumptions set out in Sections 4 and 5 below. The key
discount rate used for determining the accruing cost in 2008/2009 is 3.1%. The
results are as follows:
% of Pensionable Pay
28.6%
Standard Contribution Rate
(excluding expenses and insurance)
Members‟ Contribution Rate
6.0%
Employer‟s share of standard cost
22.6%
Allowance for expenses and insurance
1.0%
Total Employer’s cost for accruing benefits
23.6%
3.2
The actual contribution rate paid by the employer, 20.3% of pensionable salary,
including ½ % to cover the expense of running the Scheme and 0.8% contribution
toward the scheme deficit, is lower than the cost of the accruing benefits shown
above. This is because the employer‟s actual contributions are based on the
accruing cost assessed by reference to the long term view of real investment
yields, whereas the accruing annual cost disclosed for accounts purposes is based
on current market yields on bonds. At present, the current market yield is lower
than the expected long term real yield, which results in a higher contribution rate
being disclosed in the Scheme‟s accounts.
3.3
In relation to the pensionable payroll for the financial year, the Scottish
Parliamentary Corporations‟ (Consolidated Fund) charges in cash terms were £1.6
million for the financial year 2008/2009.
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Scottish Parliamentary Contributory Pension Fund
Report of the Actuary
4
4.1
5
Methodology
The value of the liabilities as at 31 March 2009 has been based on the full actuarial
valuation of the scheme that was carried out as at 31 March 2008, but using the
updated discount rate and other assumptions. The liability as at 31 March 2008
has been rolled forward to 31 March 2009 in line with the assumptions underlying
the liability calculations, allowing for expected new benefit accruals, for the actual
level of benefits paid out and for known levels of pension increases.
Assumptions
5.1
The principal financial assumptions adopted for the pension assessments made
for accounting purposes are derived in the same way as for funded pension
schemes in the private sector. This basis is driven by the AA corporate bond rate
as at the end of the accounting year.
5.2
At 31 March 2008, the discount rate in excess of price increases was assessed as
3.1% p.a. For this statement as at 31 March 2009, a higher discount rate is used,
because AA corporate bond yields have risen since 2008. The discount rate for
pension liabilities has risen to 3.8% with effect from 31 March 2009. This results in
the value of the liabilities as at 31 March 2009 being only marginally higher than as
at 31 March 2008.
5.3
The main financial assumption used for assessing the cost of pensions accruing
over the year 2008/09 is the discount rate applicable at the start of the year ie
3.1%. A lower cost for pensions accruing in 2009/10 will arise if the discount rate
applicable at 31 March 2009 (i.e. 3.8%) is to be used.
5.4
The demographic assumptions adopted for the assessments are as used in the full
actuarial valuation of the scheme as at 31 March 2008.
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Scottish Parliamentary Contributory Pension Fund
Report of the Actuary
6
Notes
6.1
Sections 2 and 3 of this Statement are based on the results of the actuarial
valuation as at 31 March 2008, but updated in line with the assumptions described
above, and rolled forward to 31 March 2009.
6.2
The pension benefits taken into account in this assessment are those normally
provided from the rules of the scheme, including normal retirement benefits, illhealth retirement benefits, and benefits applicable following the death of the
member.
D G Ballantine
Government Actuary's Department
July 2009
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Statement of Managers‟ Responsibilities
The Scotland Act 1998 (Transitory and Transitional Provisions) (Scottish Parliamentary Pension
Scheme) Order 1999 requires the Managers of the Scottish Parliamentary Contributory Pension
Fund (SPCPF) to prepare annual accounts in such a form and in such manner as the Auditor
General for Scotland may direct. The financial statements for the year ended 31 March 2009
were prepared on an accruals basis, with the exception of transfer receipts which were recorded
on a cash basis, to give a true and fair view of the financial transactions of the SPCPF during the
year, and of the disposition at 31 March 2009 of its assets and liabilities, other than liabilities to
pay benefits after the end of the Fund year.
In preparing those financial statements, the Managers were required to:

observe the accounts direction issued by the Auditor General for Scotland, including the
relevant accounting and disclosure requirements, and apply suitable accounting policies
on a consistent basis;

make judgements and estimates that were reasonable and prudent;

state whether applicable accounting standards were followed, subject to any material
departures disclosed and explained in the financial statements;

prepare the financial statements on a going concern basis, on the presumption that the
SPCPF will continue in operation.
The Managers are responsible for the keeping of proper accounting records, for ensuring that
proper financial procedures are followed and for ensuring that the accounting records are capable
of producing statements which comply with the requirements of the 1999 Order. The Managers
are also responsible for the regularity and propriety of public finances provided by the Scottish
Consolidated Fund, for safeguarding the assets of the SPCPF and for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Statement on Internal Control
Scope of Responsibility
This statement is given in respect of the accounts for the Scottish Parliamentary Contributory
Pension Fund (SPCPF). We, the Managers, acknowledge our responsibility for ensuring that an
effective system of internal control is maintained and operated to safeguard the public funds and
assets connected with the SPCPF. The SPCPF is a statutory scheme and operates within a
legislative framework. Officials from the Scottish Parliamentary Corporate Body (SPCB) and the
Scottish Public Pensions Agency (SPPA) provide a full secretariat and administrative service to
the Managers.
Purpose of System of Internal Control
The system of internal control is based on an ongoing process designed to identify the principal
risks to the achievement of the organisation‟s policies, aims and objectives, to evaluate the nature
and extent of those risks and to manage them efficiently, effectively and economically. This
process has been fully implemented in the year ended 31 March 2009 and has been in place up
to the date of approval of the annual accounts and accords with guidance from the Scottish Public
Finance Manual.
The system of internal control is designed to manage rather than eliminate the risk of failure to
achieve the organisation‟s policies, aims and objectives; it can therefore only provide reasonable
and not absolute assurance of effectiveness.
The approval of pension awards for routine retirement (i.e. due to age or non-return to the
Parliament) is delegated to the SPPA. The Managers only approve pension awards in other
circumstances (e.g. ill health).
Appointed officials of the SPCB make payment of all awards.
Managing Risk
The system of internal control and risk management is based on a framework of regular
management information, financial regulations, administrative procedures including segregation
of duties, and a system of delegation and accountability. In particular it includes:

all funds are controlled by the appointed officials of the SPCB through a designated Bank of
Scotland account;

the Managers delegated responsibility for the investment management of the SPCPF entirely
to Baillie Gifford. Custody of the investments, the receipt of income and the recovery of tax
remain the responsibility of the Managers;

regular reconciliations of the funds with the investment monies transferred are conducted by
the appointed officials of the SPCB. The Investment Managers produce monthly reports on
stock transactions and valuations;

regular reconciliations are conducted by the appointed officials of the SPCB of the designated
Bank of Scotland account;

separation of duties exists between appointed officials of the SPCB whereby the official
initiating a payment cannot authorise the production of the payable instrument or despatch
the instrument; and

the Managing Trustees have free access to all documents and records.
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Review of Effectiveness
The SPCB and the Scottish Government including SPPA are both subject to review by internal
audit who operate to standards defined in the Government Internal Audit Manual. The work of
internal audit units is informed by an analysis of the risk to which the SPCB and the Scottish
Government are respectively exposed and annual internal audit plans are based on this analysis.
Our review of effectiveness of the system of internal control is informed by the work of the internal
auditors and the senior managers within the SPCB and the Scottish Government who have
responsibility for the development and maintenance of the internal control framework. We are
also informed by our external auditors, Audit Scotland, on matters of internal control through their
management letter and reports. In addition, Internal Audit carried out detailed work on a review of
the governance arrangements for the MSP Pension Fund which was reported in January 2008.
Some of the actions to the recommendations are encompassed in the new legislation which has
been the SPCB‟s first priority in terms of addressing recommendations. Any remaining agreed
recommendations will now be addressed. Although many elements of the internal control
environment remain constant, appropriate interim arrangements were established for the
transition to the new scheme. More information on the main changes to the Scheme Rules from 1
September 2009 is contained in paragraph 19 of the Managers‟ Report.
The SPCB‟s Advisory Audit Board (AAB) met 4 times in the year ended 31 March 2009. In 200809, membership of the AAB remained at four independent external members, one of which has
the role of Chair and two members of the Corporate Body. The AAB receives reports from both
external and internal auditors and provides guidance to the Principal Accountable Officer,
Presiding Officer and the SPCB on corporate governance issues.
Approved on behalf of the Scottish Parliamentary Corporate Body as Managers of the Scottish
Parliamentary Contributory Pension Fund.
ALEX FERGUSSON MSP
Presiding Officer
Date: 29 October 2009
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Independent Auditor’s Report
To the Managers of the Scottish Parliamentary Contributory Pension Fund, the Scottish
Parliament and the Auditor General for Scotland
I have audited the financial statements of the Scottish Parliamentary Contributory Pension Fund
(the “Fund”) for the year ended 31 March 2009 under the Public Finance and Accountability
(Scotland) Act 2000 and the Scotland Act 1998 (Transitory and Transitional Provisions)(Scottish
Parliamentary Pension Scheme) Order 1999 and the directions made thereunder. These
comprise the Fund Account, Net Assets Statement and related notes. These financial statements
have been prepared in accordance with the accounting policies set out within them.
This report is made solely to the parties to whom it is addressed in accordance with the Public
Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with
paragraph 123 of the Code of Audit Practice approved by the Auditor General, I do not undertake
to have responsibilities to members, in their individual capacities, or to third parties.
Respective responsibilities of the Managers and Auditor
The Managers are responsible for the preparation of the financial statements in accordance with
the Scotland Act 1998 (Transitory and Transitional Provisions) (Scottish Parliamentary Pension
Scheme) Order 1999 and directions made thereunder by the Auditor General for Scotland. The
Managers are also responsible for ensuring the regularity of expenditure and receipts. These
responsibilities are set out in the Statement of Managers‟ Responsibilities.
My responsibility is to audit the financial statements in accordance with the relevant legal and
regulatory requirements and with International Standards on Auditing (UK and Ireland) as
required by the Code of Audit Practice approved by the Auditor General for Scotland.
I report my opinion as to whether the financial statements give a true and fair view and are
properly prepared in accordance with the Public Finance and Accountability (Scotland) Act 2000
and the Scotland Act 1998 (Transitory and Transitional Provisions)(Scottish Parliamentary
Pension Scheme) Order 1999 and the directions made thereunder. I also report whether in all
material respects:

the expenditure and receipts shown in the financial statements were incurred or applied in
accordance with any applicable enactments and guidance issued by the Scottish Ministers;
and

the contributions payable to the Fund have in all material respects been paid in accordance
with the Fund rules and the recommendation of the Actuary.
I also report if, in my opinion, I have not received all the information and explanations I require for
my audit, or if the information specified by law is not disclosed.
I review whether the Statement on Internal Control reflects the Fund‟s compliance with guidance
issued on behalf of Scottish Ministers. I report if, in my opinion, it does not. I am not required to
consider whether this statement covers all risks and controls or form an opinion on the
effectiveness of the Fund‟s corporate governance procedures or its risk and control procedures.
I read the other information published with the financial statements and consider the implications
for my report if I become aware of any apparent misstatements or material inconsistencies with
the financial statements. The other information comprises the Managers‟ Report and the Report
of the Actuary.
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Basis of audit opinion
I conducted my audit in accordance with the Public Finance and Accountability (Scotland) Act
2000 and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices
Board as required by the Code of Audit Practice. My audit includes examination, on a test basis,
of evidence relevant to the amounts, disclosures and regularity of expenditure and receipts
included in the financial statements. It also includes an assessment of the significant estimates
and judgements made by the Managers in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Fund‟s circumstances, consistently applied
and adequately disclosed.
I planned and performed my audit so as to obtain all the information and explanations which I
considered necessary in order to provide me with sufficient evidence to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by
fraud or error, and that, in all material respects, the expenditure and receipts shown in the
financial statements were incurred or applied in accordance with any applicable enactments and
guidance issued by the Scottish Ministers. In forming my opinion I also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinions
Financial statements
In my opinion:

the financial statements give a true and fair view of the financial transactions of the Fund
during the year ended 31 March 2009 and of the disposition at that date of its assets and
liabilities, other than liabilities to pay benefits after the end of the Fund year; and

the financial statements have been properly prepared in accordance with the Public Finance
and Accountability (Scotland) Act 2000 and the Scotland Act 1998 (Transitory and
Transitional Provisions)(Scottish Parliamentary Pension Scheme) Order 1999 and the
directions made thereunder.
Regularity
In my opinion in all material respects:

the expenditure and receipts shown in the financial statements were incurred or applied in
accordance with any applicable enactments and guidance issued by the Scottish Ministers;
and

the Contributions payable to the Fund during the year ended 31 March 2009 have been paid
at least in accordance with the Fund rules and the recommendation of the Actuary.
Murdoch McCamley
Senior Audit Manager
Audit Scotland
Osborne House
1/5 Osborne Terrace
Edinburgh EH12 5HG
Date 30 October 2009
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Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
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Fund Account for the year to 31 March 2009
Note
2009
£’000
2008
£‟000
4
5
6
2,102
48
167
1,983
65
2
2,317
2,050
(323)
(48)
(72)
(35)
(224)
(53)
(55)
(403)
(478)
(735)
1,839
1,315
(4,252)
(22)
(207)
17
(4,274)
(190)
Net increase in the fund during the year
(2,435)
1,125
Net Assets of the SPCPF
At 1 April 2008
At 31 March 2009
19,945
18.820
17,510
19,945
Contributions and Benefits
Contributions received
Transfers in from other schemes
Other Income
Benefits payable
Other payments
Administration expenses
Transfer out to other schemes
7
8
9
5
Net income from dealings with members
Returns on Investments
Change in market value of investments
– Managed funds
– Additional voluntary contributions
Net return on investments
10
14
The notes on pages 17 to 22 form part of these accounts
Page 15
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
Net Assets Statement as at 31 March 2009
Investments at market value
Managed funds
AVC
Current assets and liabilities
Debtors
Creditors
Note
2009
£’000
2008
£‟000
13
14
17,127
259
19,495
270
17,386
19,765
170
(46)
208
(28)
124
180
17,510
19,945
11
12
Net current assets
Net Assets of the Fund
The financial statements summarise the transactions of the SPCPF and deal with the net assets
at the disposal of the Managers. They do not take account of obligations to pay pensions and
benefits which fall due after the end of the scheme year. The actuarial position of the SPCPF,
which does take account of such obligations, is dealt with in the Government Actuary‟s report on
the position of the SPCPF as at 31 March 2009 and these financial statements should be read in
conjunction with that report.
Approved on behalf of the Scottish Parliamentary Corporate Body as Managers of the Scottish
Parliamentary Contributory Pension Fund.
ALEX FERGUSSON MSP
Presiding Officer
Date: 29 October 2009
The notes on pages 17 to 22 form part of these accounts
Page 16
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
Notes to the Financial Statements
Accounts for the year ended 31 March 2009
1. Basis of preparation
The financial statements have been prepared in accordance with an accounts direction given
by the Auditor General for Scotland, the relevant recommendations of the Statement of
Recommended Practice (SORP) “Financial Reports of Pension schemes”, and the governing
scheme legislation, The Scotland Act 1998 (Transitory and Transitional Provisions) (Scottish
Parliamentary Pension Scheme) Order 1999.
2. Prior year adjustments
The Trustees have adopted the revised SORP.
As a result investments previously valued at mid prices are now valued at bid or offer prices
for assets and liabilities respectively where there is a bid/offer spread. This is a change in
accounting policy but the difference in valuation is considered to be immaterial to the financial
statements and therefore comparatives have not been restated. As a result the comparative
figures for investments are reported on a mid price basis and the adjustment in valuation from
mid to bid/offer prices is included in current year „Changes in Market Value of Investments‟.
3. Accounting policies
The principal accounting policies are:
a)
Pension contributions from the Scottish Consolidated Fund and members are
accounted for on an accruals basis.
b)
Benefits are accounted for on the date they fall due.
c)
Transfer values from or to other pension arrangements are accounted for on a
cash basis.
d)
Refunds of contributions are accounted for on an accruals basis.
e)
All other expenditure is accounted for in the period to which it relates.
f)
Baillie Gifford investments are priced on a single swinging price basis which is
SORP compliant. Other unit investments are priced on a bid price or appropriate
SORP compliant basis.
Page 17
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
4. Contributions Receivable
Fund contributions are based on members‟ salaries.
2009
£’000
2008
£‟000
1,608
1,516
482
12
453
14
2,102
1,983
Transfer values in
2009
£’000
48
2008
£‟000
65
Transfer value out
35
403
Employers
Scottish Consolidated Fund contributions
Members
Members of the Scottish Parliament
Additional Voluntary Contributions
Total contributions Income
5. Transfer Values
6. Other Income
Interest is earned on funds held in the designated bank account awaiting transfer to the
Investment Manager.
Bank interest
Reimbursement of death in Service payment
2009
£’000
2008
£‟000
1
2
166
0
167
2
7. Benefits Payable
The Fund has twenty two current beneficiaries. Benefits payable to beneficiaries were as
follows.
Pensions
Death in Service payment
AVC pensions (note 14)
Page 18
2009
£’000
157
166
0
2008
£‟000
181
0
43
323
224
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
8. Other Payments
A Death in Service Insurance Policy is maintained.
Insurance premium
2009
£’000
48
2008
£‟000
53
2009
£’000
26
46
2008
£‟000
24
31
72
55
9. Administrative Expenses
Fees are payable to the Government Actuary and Audit Scotland.
Audit fees
Actuarial fees
The cost of administering the SPCPF was borne jointly by the Scottish Parliamentary
Corporate Body, SPCPF and the SPPA. The SPCPF is not recharged with administrative
costs incurred on its behalf by the SPPA or SPCB. Baillie Gifford‟s charge for investment
management and cost associated with the Fund is 0.53% per annum of the value of the Fund
accrued on a daily basis. The estimated management charge for the year is £90,771 (see note
10). Baillie Gifford‟s charge in 2007-2008 was 0.59% of the fund which amounted to
£115,022.
10. Changes in Market Value of Investments
Investments from income accrued are made at approximately monthly intervals.
Opening balance at 1 April
Add investments
Closing balance at 31 March
Increase/(Decrease) in Market value
2009
£’000
19,495
1,884
21,379
17,127
2008
£‟000
18,399
1,303
19,702
19,495
(4,252)
(207)
The decrease in investment of £4,251,914 includes the management charge and costs
associated with the fund of £90,771 (2007-2008: £115,022).
11. Debtors
Contributions due to the SPCPF
Insurance
Page 19
2009
£’000
2008
£‟000
170
0
163
45
170
208
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
12. Creditors
Pension Due
Audit Fee
Government Actuary
Insurance
2009
£’000
12
18
13
3
2008
£‟000
11
17
0
0
46
28
13. Investments
The following table summarises the holdings in the Baillie Gifford Managed Pension Fund as
at 31 March 2009. Fuller details of the holdings are available in the Fund‟s quarterly Report.
2009
£’000
13,955
%
81.48
2008
£‟000
16,350
%
83.87
UK
North America
Europe
Asia
Other Overseas
Emerging
4,948
2,250
2,958
1,509
445
1,845
28.89
13.14
17.27
8.81
2.60
10.77
7,533
1,860
3,183
1,739
0
2,035
38.64
9.54
16.33
8.92
0
10.44
Fixed Interest Bonds
UK 8.43%
Overseas bonds and index linked 5.83%
Cash and Deposits
2,442
14.26
1,659
8.51
730
4.26
1,486
7.62
17,127
100
19,495
100
Equities
Total Fund
Any investment income received on the Funds‟ investments and any tax recoveries are
reinvested in the pooled fund. The £1,883,347 invested this year has been used to purchase
additional units in the Baillie Gifford Managed Pension Fund.
Page 20
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
14. Additional Voluntary Contributions
The Scottish Parliamentary Pension Scheme provides for members to make additional
voluntary contributions (AVCs) to supplement their pension entitlements or insurance cover.
Members may arrange to have agreed sums deducted from their salaries for onward payment
to one of the two approved providers, Equitable Life Assurance Society or Scottish Widows.
The aggregate movements and amounts of AVC investments are as follows:
AVC investments as at 1 April
Contributions
Retirements from scheme
Gains on AVC investments
AVC investments at 31 March
Market value of AVC investments by provider
Equitable Life
Scottish Widows
2009
£’000
269
12
0
(22)
2008
£‟000
282
14
(43)
17
259
270
153
106
148
122
259
270
15. Contingent liability
In the unlikely event of default by either of the approved providers, the Scottish Parliamentary
Corporate Body will meet such contingent liability as may arise, if any, in terms of the Scotland
Act 1998 (Transitory and Transitional Provisions)(Scotland Parliamentary Pension Scheme)
Order 1999 No.1082. This guarantee does not apply to members who use their accumulated
AVC investment to purchase pension provision from a non-approved provider nor to members
who have invested in a Free Standing AVC.
16. Related party transactions
None of the members of the Scottish Parliamentary Corporate Body has undertaken anything
other than normal pension contribution transactions and will receive no enhanced benefits
other than the usual scheme benefits. The SPCB and SPPA provide administration services
and under a Service Level Agreement introduced in 2007-08 between the SPCB and SPPA
for provision of these services the SPCB incurred a fee of £7,785. Neither key management
staff nor any other related party has undertaken any material transactions with the SPCPF
during the year.
17. The Scottish Parliamentary Pension Scheme
The Scottish Parliamentary Pension Scheme is a funded defined benefit scheme. A full
actuarial valuation was carried out as at 31 March 2008. The next full actuarial valuation is
due as at 31 March 2011. The Report of the Actuary updating this to 31 March 2009 is set out
on pages 6 to 9. The major assumptions used by the Government Actuary were:
At 31 March
2009
At 31 March
2008
Gross rate of Investment Return
6.9%
6.9%
Real Rate of Return, net of Earnings increases
2.3%
1.6%
Page 21
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
Pension benefits under the scheme are increased in line with inflation. In accordance with the
FRAB, the scheme liability has been discounted at a real rate of 3.8%.
The present value of the scheme liabilities at 31 March 2009 is £21.2 million. During the year
ended 31 March 2009, members‟ and employers‟ contributions were 6% and 20.3% of
pensionable pay respectively. The 2005 Actuarial valuation recommended that Employer‟s
contributions should be set at 20.3% from April 2006. This recommendation was approved by
the Managers on 26 September 2006 and was backdated to 1 April 2006. The actual
contribution rate paid by the employer of 20.3% includes 0.5% to cover the expense of running
the Scheme and is lower than the cost of the accruing benefits shown in the Report of the
Actuary. This is because the employer‟s contributions are based on the accruing cost
assessed by reference to the long term view of real investment yields, whereas the accruing
annual cost disclosed for accounts purposes is based on current market yields. At present, the
current market yield is lower than the expected long term yield, which results in a higher
contribution rate being in the Scheme‟s accounts. The employers‟ contribution rate is 21.0%
from 1 April 2009 as result of the triennial valuation review as at 31 March 2008.
Movement in scheme liability during the year
Liability as per Valuation at 1 April
Interest rate cost
Current Service cost increase
Benefits paid
Net transfers (out)/in
Experience (Gain)/ Loss
Liability as at 31 March
Page 22
2009
£m
21.0
1.5
1.8
(0.1)
0.5
(3.5)
2008
£m
23.4
1.3
2.6
(0.2)
(0.3)
(5.8)
21.2
21.0
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________
SCOTTISH PARLIAMENTARY CONTRIBUTORY PENSION FUND
ACCOUNTS DIRECTION GIVEN BY THE AUDITOR GENERAL
FOR SCOTLAND IN ACCORDANCE WITH PARAGRAPH 4 OF
SCHEDULE 1 TO THE SCOTLAND ACT 1998 (TRANSITORY AND
TRANSITIONAL PROVISIONS) (SCOTLAND PARLIAMENTARY
PENSION SCHEME) ORDER 1999
1.
The Scottish Parliamentary Corporate Body shall prepare the Scottish Parliamentary
Contributory Pension Fund (SPCPF) financial statements for the year ended 31 March
2009 and each subsequent financial year, comprising:

a Foreword;

a Fund account; and

a Net Assets statement (including such notes as may be necessary for the purposes
referred to in the following paragraphs).
2.
The accounts shall give a true and fair view of the financial transactions of the Fund during
the year and of the disposition at the year-end of its assets and liabilities, other than
liabilities to pay pensions and benefits after the end of the Fund year.
3.
The Foreword shall consist of information concerning the Scottish Parliamentary
Contributory Pension Fund and should inter alia:

provide summary details of and a reference to the Scottish Parliamentary Corporate
Body‟s report, the investment report, the actuarial report (to be prepared at least
every 3 years), and the compliance statement. These reports shall be prepared in
accordance with the requirements of the Statement of Recommended Practice Financial Reports of Pension Schemes issued by the Pension Research Accountants
Group in 2007;

state that the financial statements have been prepared in accordance with directions
given by the Auditor General for Scotland in pursuance of paragraph 4 of Schedule 1
to the Scotland Act (Transitory and Transitional Provision) (Scotland Parliamentary
Pension Scheme) Order 1999; and

include an explanation of the statutory background to the financial statements.
4.
The Foreword will be accompanied by a statement of the Scottish Parliamentary Corporate
Body‟s responsibilities, which together with the Foreword and Accounts will be published
not later than nine months after the end of the financial year to which the account relates.
5.
Subject to these requirements, the financial statements shall be prepared in accordance
with:

the Statement of Recommended Practice (SORP), Financial Reports of Pension
Schemes, issued in 2007 in so far as this is appropriate to the circumstances of the
Fund;
Page 23
Scottish Parliamentary Contributory Pension Fund – Annual Accounts 2008-2009
________________________________________________________________________

generally accepted accounting practice in the United Kingdom (UK GAAP) where
relevant to the Fund‟s circumstances; and

the 1995 Pensions Act, in so far as this is required for the Fund.
6.
The financial statements, prepared in accordance with this Direction must be sent for audit
to the Auditor General for Scotland not later than 6 months after the end of the financial
year to which the account relates.
7.
This Accounts Direction supersedes that issued on 5 May 2004.
Auditor General for Scotland
4 August 2009
Page 24