4. Local Government Pensions
4.1 Local Government Pensions
Local Government Pension Scheme Funds are operated as separate funds to other accounts. In accordance with regulation 4 of the Local Government Pension Scheme (Benefits, Membership and Contributions) (Scotland) Regulations 2008, and regulation 35 of the Local Government Pension Scheme (Administration) (Scotland) Regulations 2008, employer and employee contributions are paid into the fund, along with income from investments, and pensions and lump sum benefits are paid out of the fund. The income and expenditure from these funds are therefore entirely separate from the income and expenditure of the Authorities that administer the funds.
Tables 4.1 and 4.2 show the collective income and expenditure for the Local Government Pension Scheme for the year in question, with income from contributions representing payments for pensionable service accrued during the year which will be paid out (as part of an overall pension) at a future date and expenditure on pensions representing payments of previously accrued pension rights. The relative financial health of the pension scheme is gauged through three-yearly actuarial valuations of each of the eleven funds.
|Total Benefits including Payments under Pensions (Increase) Acts:||841,026||969,723||1,021,142||1,025,525||1,069,643|
|Payments under Pensions (Increase) Acts1||63,035||61,537||66,469||179,156||190,925|
1. Payments under the Pensions (Increase) Act 1971 relate to costs associated with uprating of pensions. In some cases local authorities were unable to separately identify this cost and included it within pensions, lump sums & other benefits.
2. Transfer Values are due to scheme members transferring to other pension schemes (for example where a scheme member has moved to a different employer).
3. "Other Benefits" includes, Fund Administration and Management Costs (the largest component); Refunds of Contributions; Adjustments; and Premiums.
4. In previous editions of this annual publications, Losses on Realisation of Investments were included under pension funds expenditure, and Profits on Realisation of Investments were included under pension fund income. In this edition, these elements are combined as Net Profits on Realisation of Investment (i.e. profit minus loss), and reported in table 4.2.
Table 4.1 details the total expenditure of the Local Government Pension Scheme Funds in Scotland since 2009-10. The trend of pension funds expenditure increases in 2009-10 and 2010-11, followed by a flattening off of expenditure in later years, reflects the underlying pattern of early retirements which increased to a peak in 2010-11 before subsequently reducing. The reduction in other expenditure is partially due to changes to form design and guidance.
|Contributions (including those from other employing authorities)||Employees||273,280||276,179||262,811||258,219||266,780|
|Net Investment and Other Income1||3,882,044||1,538,331||516,367||3,040,095||2,063,964|
Source: Local Financial Returns - LFR 24
1. In previous editions of this annual publications, Losses on Realisation of Investments were included under pension funds expenditure, and Profits on Realisation of Investments were included under pension fund income. In this edition, these elements are combined as Net Profits on Realisation of Investment (i.e. profit minus loss), which simplifies interpretation of the data and is more consistently reported by data providers.
b. To reduce the burden on data providers, the categories Investment Income (gross) and Transfer Values used in previous years were combined with 'Other Income' for the 2012-13 data collection.
Table 4.2 shows Local Government Pension Scheme Funds Income since 2009-10. Contributions from Employees and Employers are both dependent on the number of contributing employees (full time and part-time) and are both relatively stable over time. Contributions from Employees are fixed at a set percentage of pay, depending on level of salary. Contribution rates from employers are variable and are reviewed on a triennial basis, with actuaries determining the contribution rates for the following three years.
More fluctuation is seen in Other Income and, in particular, Net Profits on Realisation of Investments. Net Investment income is influenced by investment conditions (e.g. changes in the stock market) and is clearly the most variable component of the total Pension Funds Income.
Email: Euan Smith