PRAG publishes addendum to the Pensions SORP on investment disclosures
The Pensions Research Accountants Group (PRAG) has published an addendum to the Pensions SORP on revised investment disclosure requirements in pension scheme annual reports.
The purpose of addendum is to bring these additional requirements to the attention of pension scheme accounts preparers. Pension scheme auditors should also find the addendum helpful.
The addendum refers to matters to be dealt with within the narrative elements of pension scheme annual reports. Its content does not impact on the requirements, within the Pensions SORP, which apply to pension scheme financial statements.
More about the addendum
Recently implemented investment regulations include disclosure requirements for certain pension schemes, which must be met within their annual report, in relation to:
- The Statement of Investment Principles (SIP)
- The Implementation Statement
- Disclosures in the investment report
It is difficult to interpret the purpose of certain duplicated disclosure requirements within these documents. Therefore, the addendum has been provided on a factual basis to raise awareness of the regulations and their requirements.
The addendum is available to PRAG members via the member zone of the PRAG website.
About implementation statements
Implementation statement prepared by Defined Benefit (DB) schemes must set out how and the extent to which the scheme’s policies on stewardship have been followed during the scheme’s financial year.
Implementation statements prepared by Defined Contribution (DC) schemes must:
- Set out how and the extent to which the scheme’s SIP has been followed during the scheme’s financial year.
- Describe any formal review of the SIP undertaken during the year and any review of how the SIP has been met.
- Explain any changes made to the SIP during the scheme year and the reason for any changes.
- Provide the date of the last formal review of the SIP, if such a review has not been undertaken during the year.
Both DB and DC schemes must also describe voting behaviour by, or on behalf of, its trustees during the scheme’s financial year, disclosing the use of the services of a proxy voter where relevant.
ICAS comments to DWP on investment reporting requirements
In its recent response to the DWP’s proposals on climate governance and climate reporting requirements for pension schemes, the ICAS Pensions Panel raised concerns about the complexity of investment reporting requirements.
Some investment reporting requirements must be met within pension scheme annual reports, with some aspects to be made public, yet there is no requirement for pension schemes to file or to make their entire annual report public, including their financial statements.
In the case of the Taskforce on Climate-related Financial Disclosures (TCFD reports), the requirement will be for a scheme’s annual report to carry a link to where the TCFD report is publicly available.
We believe there is scope for reviewing the investment reporting requirements placed on pension schemes to determine if they are fit for purpose, including the approach to requiring some investment information to be included within scheme annual reports.
The regulations underpinning the investment reporting requirements which have evolved over time are complex and difficult to interpret.