2011/2012 audited annual accounts - Falkirk Council

Post Employment Benefits
FALKIRK COUNCIL
The Council participates in two separate pension schemes that meet the needs of employees in different services:
• The Teachers’ Pension Scheme, administered by the Scottish Public Pensions Agency.
• The Local Government Pension Scheme, administered by Falkirk Council.
Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees
work for the Council. In addition, from time to time, the Council may award discretionary benefits to employees
who are retiring.
Teachers
The Teachers’ Pension Scheme is an unfunded scheme where the employer contribution rate is 14.9% of
pensionable pay. The Scottish Government has set this rate on the basis of a notional fund. The most recent
actuarial valuation of the Teachers’ Pension Scheme took place on 31 March, 2005. A valuation at 31 March
2009 was scheduled but following an instruction from HM Treasury relating to pensions reform, the process was
put on hold. Further details about the valuation process should be obtained from the scheme administrators who
are the Scottish Public Pensions Agency.
The arrangements for the teachers’ scheme mean that the liabilities for employee benefits cannot be identified
specifically to the Council. The pension costs are therefore accounted for as if the scheme were a defined
contributions scheme – no liability for future payment of benefits is recognised in the Balance Sheet and the
Education Services line in the Comprehensive Income & Expenditure Statement is charged with the employer’s
contributions payable to Teachers’ Pensions in the year.
As a result, the Council does not comply with Code to recognise the full expected cost of providing for all
pensions and related benefits on a systematic and rational basis over the period the Council derives benefit from
its employees' service.
Other Employees
Other employees are eligible to join the Local Government Pension Scheme through the Pension Fund
administered by the Council. The Scheme is accounted for as a defined benefits scheme.
The Scheme is a funded arrangement with the employer's contribution rate being set on a three yearly basis by an
independent actuary. The rate is set to ensure that the Pension Fund remains solvent and with a view to meeting
100% of its overall liabilities in the long term. Full details of the most recent actuarial valuation can be found in
the Annual Report and Accounts of Falkirk Council Pension Fund.
The liabilities of the Local Government Pension Scheme attributable to the Council are included in the Balance
Sheet on an actuarial basis using the projected unit method (i.e. an assessment of the future payments that will be
made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates,
employee turnover rates, etc, and projections of future earnings for current employees).
Liabilities are discounted to their value at current prices, using a discount rate of 4.8% (based on the indicative
rate of return on high quality corporate bonds).
The assets attributable to the Council are included in the Balance Sheet at their fair value. Where there is an
active market, bid price is usually the appropriate quoted market price:
• Quoted securities – current bid price
• Unquoted securities – professional estimate
• Unitised securities – current bid price
• Property – market value.
The change in the net pensions liability is analysed into several components:
• current service cost - the increase in liabilities as a result of years of service earned this year – allocated in the
Comprehensive Income & Expenditure Statement to the services for which the employees worked
• past service cost - the increase in liabilities arising from current year decisions whose effect relates to years
of service earned in earlier years – debited to the Surplus/Deficit on the Provision of Services in the
Comprehensive Income & Expenditure Statement as part of Non-Distributed Costs
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