All change for pension scheme accounts
While freedom and choice in pensions has grabbed the headlines and focused public attention on how well the industry is delivering these reforms, another important but somewhat less newsworthy change is afoot. Christine Scott explains more.
From 1 January 2015, private sector trust-based pension schemes are required to prepare their accounts in accordance with FRS 102 (The new Financial Reporting Standard applicable in the UK and the Republic of Ireland).
A revised Statement of Recommended Practice for pension schemes (SORP 2015) has been issued to accompany FRS 102 which is designed to assist scheme trustees comply with the new requirements.
The ICAS Pensions Committee, in conjunction with pension professionals from across the industry, has prepared two thought pieces to assist those involved in the preparation and scrutiny of scheme accounts to get to grips with the new requirements:
- Accounting by pension schemes under FRS 102
- Practical considerations for preparing pension scheme reports and accounts under FRS 102
It is vitally important that schemes plan in advance for SORP 2015 compliance which will impact first on those schemes with 31 December 2015 year-ends. There is a considerable amount of information which will need to be gathered, for example, to comply with new investment risk disclosures.
SORP 2015 has been prepared with the aim of not extending the accounting and disclosure requirements beyond what is necessary to comply with FRS 102 except where this is viewed as proportionate. However, there are clearly areas where complying with FRS 102 is perhaps unduly onerous for pension schemes.
While compliance with the new requirements will likely place a strain on scheme governance budgets, there could be some positives around improved stewardship.
For example, trustees will be obliged to review their scheme's statement of investment principles which could be a valuable exercise, especially perhaps for smaller schemes where the trustees may not have given any recent consideration as to why certain investments are being held.
Time is very much of the essence and teamwork, advance planning and effective communication among all industry professionals involved will be essential to delivering SORP 2015 complaint reports and accounts.
Christine Scott is ICAS Assistant Director, Charities and Pensions. Christine is a member of the SORP Working Party which prepared SORP 2015 on behalf of the Pensions Research Accountants Group (PRAG).