Scottish Local Government Financial Statistics 2011-12

5. Local Government Pensions

5.1 Local Government Pensions

Local Government Pension 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 separate from the income and expenditure of the Authorities that administer the funds.

Table 5.1 - Local Government Pension Funds Expenditure

£ thousands

1 - See table 5.2 for breakdown.

Source: Local Financial Returns - LFR 24

Table 5.2 - Local Government Pension Funds Expenditure on Benefits

£ thousands

Source: Local Financial Returns - LFR 24

Table 5.1 details the total expenditure of the Local Government Pension funds in Scotland in 2011-12.

The most variable component of the expenditure is Losses on Realisation of Investments which reflects the investment conditions at the time and is therefore dependent on economic factors. It should be noted that table 5.3 shows profits on Realisation of Investments, hence the net gain is the losses in table 5.1 subtracted from the profits in table 5.3. The variability of this net profit/loss is illustrated by the fact that a net loss in 2008-09 is followed by a large net gain in 2009-10.

Total Benefits comprises of Pensions, Lump Sums and Other Benefits and a further breakdown of this category is shown in Table 5.2. An underlying increase in the number of retirements is likely to be a key factor in the increase seen in Total Benefits. For example, increases in the number of early retirements will impact the Lump Sum expenditure in Table 5.2 as well as the Pensions costs.

Payments under the Pensions (Increase) Act 1971 relate to costs associated with uprating of pensions, and Transfer Values are due to scheme members transferring to other pension schemes (for example where a scheme member has moved to a different employer).

'Other Expenditure' includes administration costs (for example in relation to managing funds).

Table 5.3 - Local Government Pension Funds Income

£ thousands

Source: Local Financial Returns - LFR 24 (note - as part of work to reduce the burden on data providers, the categories Investment Income (gross) and Transfer Values were combined with 'Other Income' for the 2011-12 data collection)

Table 5.3 shows changes in Local Government Pension Funds Income over time. As discussed above, Profits on Realisation of Investments is the most variable component and should be viewed in conjunction with Losses on Realisation of Investments from table 5.1.

Contributions from Employees are fixed at a set percentage of pay, depending on level of salary and the total is therefore relatively flat over time. The figure is dependent on the number of contributing employees (full time and part-time). Contribution rates from employers are variable and are reviewed on a triennial basis, with actuaries determining the contribution rates for the following three years. Increases in employer contribution rates are reflected in increasing pension fund income.

Transfer Values represent income to pension funds from employees transferring previous pensionable service into the Local Government Pension Scheme.