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Remuneration Report

Appointments

10. 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.

11. Sir John Elvidge is Permanent Secretary at the Scottish Executive. He was appointed 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 5 and Chapter 11 of the Civil Service Management Code.

12. Other Heads of Department 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.

13. The senior management 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.

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

14. Independent non-executive members of the Senior Management Team 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

15. The salaries of the Scottish Executive 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).

16. 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).

17. 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 departments to meet the output targets for the delivery of departmental services;
• the funds available to departments as set out in the Government's departmental expenditure limits; and
• the Government's inflation target.

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

19. Within the Scottish Executive, the Top Level Pay Committee, comprising members of the Senior Management Team and including the non-executive members, ensures that the pay strategy for the Pay and Performance Management System ( PPMS) policy falls within the parameters set by the SSRB and Cabinet Office. The strategy is administered by a system of Pay Committees who determine salary and bonus recommendations based on assessments of performance.

20. 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.

21. Remuneration for other members of the Senior Management Team is determined by the Heads of Department Pay Committee, which comprises the Permanent Secretary, the Director of Change and Corporate Services and the non-executive members of the Senior Management Team. Starting salaries for new appointees are determined by the Permanent Secretary within a framework approved by the Civil Service Commissioners.

22. Non-executive members receive fees for attendance at regular Senior Management Team meetings and Scottish Executive Audit Committee ( SEAC) meetings. Non-executive members expenses incurred in attending these meetings are also reimbursed.

Remuneration

23. The remuneration of the First Minister and his cabinet team and of the members of the Senior Management Team, who served during the year, is noted below.

Ministers and Law Officers

24. The salary and benefits in kind of the First Minister and his cabinet team from 1 April 2006 to 31 March 2007 which are reflected in the accounts of the Scottish Parliamentary Corporate Body are shown in the table below along with those of serving Law Officers. Ministerial salaries are in addition to their salaries and entitlements as MSPs.

(1) The First Minister has a benefit-in-kind for 2006-07 of £2,800, arising from the provision of accommodation at Bute House (2005-06: £3,200).

Senior Management Team

25. The salary and benefits in kind of the Permanent Secretary and members of the Scottish Executive Senior Management Team, 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 Executive and Richard Wakeford, the Scottish Executive 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 (2005-06: £10,000).

The fees for the non-executive members of the Scottish Executive Senior Management Team are as follows:

No non-executive members of the Senior Management Team 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 Executive and treated by the HM Revenue and Customs as a taxable emolument.

Pension benefits

Ministers and Law Officers

The pension entitlements of the First Minister and his cabinet team from 1 April 2006 to 31 March 2007 which are reported in the accounts of the Scottish Parliamentary Corporate Body are shown in the table below. This is in addition to their pension entitlements as MSPs. The pension entitlements of the Law Officers are also reported in the accounts of the Crown Office and Procurator Fiscal Services.

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 will be paid from the Scottish Consolidated Fund based on half the First Minister's salary. It is non-contributory and non-transferable so no Cash Equivalent Transfer Values ( CETVs) are available.

Cash Equivalent Transfer Values

26. 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 pension benefits they have 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

27. This reflects the increase in CETV effectively funded by the employer. It takes account of 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

28. The pension entitlements of the Permanent Secretary and members of the Scottish Executive Senior Management Team, excluding the non-executive members, 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.

(2) The CETV for Eddie Frizzel has decreased a result of his retirement and starting to draw on the fund.

Civil Service Pensions

29. Pension benefits are provided through the Civil Service pension arrangements. From 1 October 2002, civil servants may be in one of three statutory based "final salary" defined benefit schemes (classic, premium, and classic plus). The schemes are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, and classic plus are increased annually in line with changes in the Retail Prices Index. New entrants after 1 October 2002 may choose between memberships of premium or joining a good quality "money purchase" stakeholder based arrangement with a significant employer contribution (partnership pension account).

30. Employee contributions are set at the rate of 1.5% of pensionable earnings for classic and 3.5% for premium and classic plus. Benefits in classic accrue at the rate of 1/80th of pensionable salary 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 (but members may give up (commute) some of their pension to provide a lump sum). Classic plus is essentially a variation of premium, but with benefits in respect of service before 1 October 2002 calculated broadly as per classic.

31. 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. 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).

32. The accrued pension quoted is the pension the member is entitled to receive when they reach 60, or immediately on ceasing to be an active member of the scheme if they are already 60.

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

Cash Equivalent Transfer Values

34. 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 arrangements 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.

35. 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

36. This reflects the increase in CETV effectively funded by the employer. It takes account of the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market factors for the start and end of the period.

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