Public Audit Committee
Meeting date: Wednesday, May 29, 2013
Official Report
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Scottish Teachers’ Superannuation Scheme
Agenda item 4 is correspondence on the Scottish teachers’ superannuation scheme. Following a letter that we received from Mr Swinney, drawing our attention to an error in the calculation of the liabilities for the Scottish Public Pensions Agency, we wrote to ask him how the error had come to light and what impact there had been on public spending as a result of the mistake. We also wrote to ask the Auditor General whether she was satisfied that the proper checks and balances were in place. We have received responses from Mr Swinney and, at his request, from the Government Actuary’s Department and from the Auditor General.
Do committee members have any comments?
The responses seem fair enough.
It is worth recording that the gentleman from the Government Actuary’s Department states:
“I was very upset ... and offer my full personal apology.”
We should certainly accept that gracious apology.
On the £77 million involved, I recall that the most recent Audit Scotland report on pensions revealed that the teachers’ pension fund had the biggest deficit, which was of £240 million. The amount involved is not only significant but relates to a fund that has the biggest deficit in the whole of Scotland’s public sector.
I did not quite understand the paragraph at the bottom of page 2 of the letter, which states that
“the approach followed lacked a process checklist”.
Are you referring to the letter from the Government Actuary’s Department?
Yes. At the bottom of page 2, the actuary states:
“the approach followed lacked a process checklist of the nature necessary for a team working away from GAD’s main office”.
My concern relates to the next paragraph, at the top of page 3, which starts:
“Having regard to Scottish Government’s requirements for actuarial support over the period to the independence referendum in September 2014”.
It is not entirely clear how the Government’s requirements for actuarial support leading up to the referendum will impact on pensions and other things. Far from giving me reassurance, that leads me to a bit of doubt. I wonder whether there are additional pressures on the department because of the referendum and whether it has all the staff that it needs to carry out its job.
The letter makes it clear that, even if the Scottish Government was looking for the department to do something extra in the run-up to the referendum, the department has said no, so it cannot be under any extra pressure due to the referendum. I am not sure why the issue is mentioned in the letter, but I do not see how it can be read from the letter that the Government Actuary’s Department is under extra pressure.
The paragraph at the top of page 3 continues:
“we have concluded that it would not be appropriate, for the foreseeable future, to build up a team in the GAD Edinburgh office with the necessary critical mass to provide that support.”
That just led to some doubt in my mind.
To go back to the main issue—I do not know why the referendum is mentioned in the letter—I think that it was a refreshing change to read the response, in which the actuary Mr Llanwarne apologises and indicates that the error was not the Scottish Government’s fault. I suppose that it is very unusual for actuaries to get something like that wrong.
I point out that the last sentence on page 1 of the Auditor General’s letter states that the error
“did not affect the scheme’s net expenditure for the year or outturns on the Scottish budget for 2011/12.”
Basically,
“The error affected the element of the valuation that reflects technical changes in actuarial assumptions”.
I do not pretend to understand fully what that means, but I am comforted by the Auditor General’s comment that the error did not affect the outturns on the Scottish budget for 2011-12. I am content with the responses.
That seems a fair summary. The two key issues that we raised were who was responsible for the error and what impact it had on public spending. The answers that we have received are very clear and reassuring. Do we agree to note the correspondence?
Members indicated agreement.