Financial Statements 2019/2020
MIDDLESEX UNIVERSITY NOTES TO THE ACCOUNTS (continued)
Year Ended 31 July 2020
There are four main types of donations and endowments identified within reserves:
1. Restricted donations – the donor has specified that the donation must be used for a particular objective.
2. Unrestricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream for the general benefit of the University.
3. Restricted expendable endowments – the donor has specified a particular objective other than the purchase or construction of tangible fixed assets, and the University has the power to use the capital.
4. Restricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream to be applied to a particular objective.
F. Agency arrangements
Funds the University receives and disburses as paying agent on behalf of a funding body (or other body) are excluded from the Consolidated Statement of Comprehensive Income and Expenditure of the University where the University is exposed to minimal risk or enjoys minimal economic benefit related to the transaction. The balances and movement of these funds are disclosed in notes 32 to 34.
G. Accounting for Retirement Benefits
The University contributes to two principal staff pension schemes for the University’s staff, the Teachers’ Pension (TPS), independently administered by the Department for Education (DfE) and the Local Government Pension Scheme (LGPS), independently administered by the London Borough of Barnet.
The schemes are defined benefit schemes which are externally funded and for the period up to 5 April 2016 were contracted out of the State Second Pension (S2P) when contracting-out ceased on the introduction of the Governments new state pension on 6 April 2016.
The TPS is valued every four years and the LGPS every three years by professionally qualified independent actuaries.
Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees worked for the University. However, the
arrangements for the TPS mean that liabilities for these benefits cannot ordinarily be identified specifically to the University. The scheme is therefore accounted for as if it was a defined contribution scheme and no liability for future payments of benefits is recognised in the Statement of Financial Position.
Defined Contribution Scheme
A defined contribution scheme is a pension scheme under which the University pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. The University’s obligations for contributions to the TPS whilst being a defined benefit scheme is treated as a defined contribution scheme as explained above and are recognised as an expense in the Consolidated Statement of Comprehensive Income and Expenditure in the periods during which services are rendered by employee members.
Defined Benefit Scheme
Defined benefit schemes are pension schemes other than defined contribution schemes. Under defined benefit schemes, the University’s obligation is to provide the agreed benefits to current and former employees, and actuarial risk (that benefits will cost more or less than expected) and investment risk (that returns on assets set aside to fund the benefits will differ from expectations) are borne, in substance, by the University. The Group recognises a liability for its obligations under the LGPS net of plan assets. This net defined benefit liability is measured as the estimated amount of benefit that employees have earned in return for their service in the current and prior periods, discounted to determine its present value, less the fair value (at bid price) of scheme assets. The calculation is performed by a qualified actuary using the projected unit credit method. Where the calculation results in a net asset, recognition of the asset is limited to the extent to which the University is able to recover the surplus either through reduced contributions in the future or through refunds from the scheme.
Other pension benefits The University continues to make a small and diminishing number of supplementary payments to former staff and dependants of those staff, who took early retirement during the 1990’s. The liabilities of the pension enhancements on termination can be estimated under FRS 102 and are included in the Financial Statements at note 22.
Middlesex University
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