Scottish Government

REMUNERATION REPORT

19. All information disclosed in the tables at paragraphs 35 to 42 and paragraph 45 below has been audited by Audit Scotland. The other sections of the Remuneration Report were reviewed by Audit Scotland to ensure that they were consistent with the financial statements.

Appointments

20. Civil service appointments are made in accordance with the Civil Service Commissioners' Recruitment Code, which requires appointment to be on merit on the basis of fair and open competition but also includes the circumstances when appointments may otherwise be made.

21. Sir John Elvidge is the Permanent Secretary at the Scottish Government. He was appointed in July 2003 by the Prime Minister, with the agreement of the First Minister, on the recommendation of the Head of the Home Civil Service following an open competition. The appointment is for an indefinite term under the terms of the Senior Civil Service contract. The rules for appointment were those set out in Chapter 1 and Chapter 5 of the Civil Service Management Code.

22. Other Executive members of the Scottish Government Strategic Board were appointed following approval by the Prime Minister, following consultation with the First Minister, on the recommendation of the Head of the Home Civil Service.

23. The Executive members of the Scottish Government Strategic Board covered by this report hold appointments which are open-ended until they reach the normal retirement age. The rules for termination are set out in chapter 11 of the Civil Service Management Code. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme. The retirement age for the Senior Civil Service rose to 65 from 1 October 2006, in line with the implementation of the Employment Equality (Age) Regulations 2006. However, once an individual's pension becomes payable, from age 60, that employee can choose to leave work and collect his or her pension at any time, subject only to compliance with the basic notice of leave requirements.

24. Further information about the work of the Civil Service Commissioners can be found at www.civilservicecommissioners.gov.uk.

25. Independent non-executive members of the Scottish Government Strategic Board are appointed by the Permanent Secretary for an initial period of two years. Such appointments can be terminated with one month's notice period. There is no provision for compensation for early retirement.

Remuneration Policy

26. The salaries of the Scottish Government Ministers were established under section 81(1) and (2) of the Scotland Act 1998. They are paid through the Scottish Parliamentary Corporate Body ( SPCB) and reflected in the SPCB's annual accounts ( www.scottish.parliament.uk).

27. The remuneration of senior civil servants is set in accordance with the Civil Service Management Code (available at www.civilservice.gov.uk) and with independent advice from the Senior Salaries Review Body ( SSRB).

28. In reaching its recommendations, the SSRB is to have regard to the following considerations:

• the need to recruit, retain and motivate suitably able and qualified people to exercise their different responsibilities;
• regional/local variations in labour markets and their effects on the recruitment and retention of staff;
• Government policies for improving the public services including the requirement on portfolios to meet the output targets for the delivery of portfolio services;
• the funds available to portfolios as set out in the Scottish Government's portfolio expenditure limits; and
• the Government's inflation target.

29. Further information about the work of the SSRB can be found at www.ome.uk.com.

30. Within the Scottish Government, the Top Level Pay Committee, comprising the Permanent Secretary, the Director-Generals and the Non-executive members of the Strategic Board, ensures that the Pay and Performance Management System ( PPMS) policy falls within the parameters set by the SSRB and Cabinet Office. The SCS Pay Strategy 2007 determined that the base pay award for all members of the Senior Civil Service whose performance is satisfactory would be 2%; bonus awards (high £11,500, medium £7,500, low £3,500) were also available for satisfactory performers within a pool scheme based on a ranking of performance in achieving agreed business objectives and contributing to corporate priorities. The Pay strategy is administered by a system of Pay Committees who determine salary and bonus recommendations based on assessments of performance.

31. The Permanent Secretary's remuneration is set individually by the UK Government on the recommendation of the Permanent Secretaries' Remuneration Committee, which comprises members of the SSRB, the Head of the Home Civil Service and the Permanent Secretary of HM Treasury.

32. Remuneration for other members of the Scottish Government Strategic Board is determined by the Director General Pay Committee, which comprises the Permanent Secretary and the non-executive members of the Scottish Government Strategic Board. Starting salaries for new appointees are determined by the Permanent Secretary within a framework approved by the Civil Service Commissioners.

33. Non-executive members receive fees for attendance at regular Scottish Government Strategic Board meetings and Scottish Government Audit Committee ( SGAC) meetings. Non-executive members expenses incurred in attending these meetings are also reimbursed.

Remuneration

34. The remuneration of the Ministers who served over the period 1 April 2007 to 31 March 2008 and members of the Scottish Government Strategic Board is noted below.

Ministers and Law Officers

35. The salary and benefits in kind of the First Minister and his cabinet team from 16 May 2007 to 31 March 2008 which are reflected in the accounts of the Scottish Parliamentary Corporate Body are shown in the table below. Ministerial salaries are in addition to their salaries and entitlements as MSPs.

(1) The First Minister has a benefit in kind for 2007-08 of £352, arising from the provision of accommodation at Bute House for the period 16 May 2007 to 31 March 2008.

36. The salary and benefits in kind of the First Minister and his cabinet team from 1 April 2007 to 16 May 2007 which are reflected in the accounts of the Scottish Parliamentary Corporate Body are shown in the table below. Ministerial salaries are in addition to their salaries and entitlements as MSPs.

(1) Jack McConnell has a benefit in kind for 2007-08 of £19, arising from the provision of accommodation at Bute House for the period from 1 April 2007 to 16 May 2007 (2006-07: £2,800).

37. The salary and benefits in kind of the serving Law Officers for the year to 31 March 2008 are shown in the table below.

Senior Management Team

38. The salary and benefits in kind of the Permanent Secretary and members of the Scottish Government Strategic Board, excluding the non-executive members, were as follows (equivalent information relating to senior managers of the other bodies consolidated within these accounts is given in their respective annual accounts):

(1) A benefit in kind of £10,000 is shown as arising because, under the employment contract between the Scottish Government and Richard Wakeford, the Scottish Government agreed to meet the tax liability on that element of Richard Wakeford's remuneration which he offered to receive on a non pensionable, non consolidated basis (2006-07: £10,000).

39. The fees for the non-executive members of the Scottish Government Strategic Board are as follows:

No non-executive members of the Scottish Government Strategic Board received benefits in kind.

The non-executive members do not participate in the Civil Service Pension Scheme.

Salary

'Salary' includes gross salary; performance pay or bonuses; overtime; reserved rights to London weighting or London allowances; recruitment and retention allowances; private office allowances and any other allowance to the extent that it is subject to UK taxation and any ex-gratia payments.

Benefits in Kind

The monetary value of benefits in kind covers any benefits provided by the Scottish Government and treated by HM Revenue and Customs as a taxable emolument.

Pension benefits

Ministers and Law Officers

40. The pension entitlements of the First Minister and his cabinet team from 16 May 2007 to 31 March 2008 are shown in the table below.

The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total ministerial service, and not just their current appointment as a Minister.

The Ministers are members of the Scottish Parliamentary Pension Scheme, full details of which are available from www.sppa.gov.uk.

(1) The First Minister's pension is payable from the Scottish Consolidated Fund and is equal to one half of salary payable at the point of ceasing to hold office. The pension is non-contributory and non-transferable so no Cash Equivalent Transfer Values ( CETVs) is available. Additionally there is no option of commutation i.e. the First Minister may not commute (give up) some of his pension to provide a lump sum.

41. The pension entitlements of the First Minister and his cabinet team from 1 April 2007 to 16 May 2007 are shown in the table below.

The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total ministerial service, and not just their current appointment as a Minister.

The Ministers are members of the Scottish Parliamentary Pension Scheme, full details of which are available from www.sppa.gov.uk.

(1) The First Minister's pension is payable from the Scottish Consolidated Fund and is equal to one half of salary payable at the point of ceasing to hold office. The pension is non-contributory and non-transferable so no Cash Equivalent Transfer Values ( CETVs) is available. Additionally there is no option of commutation i.e. the First Minister may not commute (give up) some of his pension to provide a lump sum.

42. The pension entitlements of the Law Officers are also reported in the accounts of the Crown Office and Procurator Fiscal Services.

Cash Equivalent Transfer Values

43. A Cash Equivalent Transfer Value ( CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued benefits and any contingent spouse's pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. CETVs are calculated within the guidelines and framework prescribed by the Institute and Faculty of Actuaries.

Real increase in CETV

44. This reflects the increase in CETV effectively funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the Minister (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

Senior Management Team

45. The pension entitlements of the Permanent Secretary and members of the Scottish Government Strategic Board were as follows (equivalent information relating to senior managers of other bodies consolidated within these accounts is given in their respective annual accounts):

(1) There is no automatic right to a lump sum for officials who are members of the Premium Pension Scheme.

Civil Service Pensions

46. Pension benefits are provided through the Civil Service pension arrangements. From 30 July 2007, civil servants may be in one of four defined schemes; either a 'final salary' scheme (classic, premium, and classic plus); or a 'whole career' scheme (nuvos). These statutory arrangements are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, classic plus and nuvos are increased annually in line with changes in the Retail Prices Index ( RPI). Members joining from October 2002 may opt for either the appropriate defined benefit arrangement or a good quality 'money purchase' stakeholder pension with a significant employer contribution (partnership pension account).

47. Employee contributions are set at the rate of 1.5% of pensionable earnings for classic and 3.5% for premium, classic plus and nuvos. Benefits in classic accrue at the rate of 1/80th of final pensionable earnings for each year of service. In addition, a lump sum equivalent to three years' pension is payable on retirement. For premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike classic, there is no automatic lump sum. Classic plus is essentially a hybrid with benefits in respect of service before 1 October 2002 calculated broadly as per classic and benefits for service from October 2002 calculated as in premium. In nuvos a member builds up a pension based on his pensionable earnings during their period of scheme membership. At the end of the scheme year (31 March) the member's earned pension account is credited with 2.3% of their pensionable earnings in that scheme year and the accrued pension is uprated in line with RPI. In all cases members may opt to give up (commute) pension for lump sum up to the limits set by the Finance Act 2004.

48. The partnership pension account is a stakeholder pension arrangement. The employer makes a basic contribution of between 3% and 12.5% (depending on the age of the member) into a stakeholder pension product chosen by the employee from a panel of three providers. The employee does not have to contribute but where they do make contributions, the employer will match these up to a limit of 3% of pensionable salary (in addition to the employer's basic contribution). Employers also contribute a further 0.8% of pensionable salary to cover the cost of centrally-provided risk benefit cover (death in service and ill health retirement).

49. The accrued pension quoted is the pension the member is entitled to receive when they reach pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over pension age. Pension age is 60 for members of classic, premium and classic plus and 65 for members of nuvos.

50. Further details about the Civil Service pension arrangements can be found at the website www.civilservice-pensions.gov.uk

Cash Equivalent Transfer Values

51. A Cash Equivalent Transfer Value ( CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued benefits and any contingent spouse's pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies. The figures include the value of any pension benefit in another scheme or arrangement which the individual has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their purchasing additional pension benefits at their own cost. CETVs are calculated within the guidelines and framework prescribed by the Institute and Faculty of Actuaries and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are drawn.

52. The CETV figures, and from 2003-04, the other pension details, include the value of any pension benefit in another scheme or arrangement which the individual has transferred to the Civil Service pension arrangements and for which the Civil Service Vote has received a transfer payment commensurate to the additional pension liabilities being assumed. They also include any additional pension benefit accrued to the member as a result of their purchasing additional years of pension service in their scheme at their own cost. CETV's are calculated within the guidelines and framework prescribed by the Institute and Faculty of Actuaries.

Real increase in CETV

53. This reflects the increase in CETV effectively funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the Minister (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

Principal Accountable Officer

Date: 23 September 2008