ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

COVID-19: Guidance on pension scheme financial reports and audit

  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Christine Scott, Head of Charities and Pensions

2 June 2020

Main points:

  • ICAS, ICAEW and PRAG have published new joint guidance on pension scheme reports and financial statements, and related matters in the context of the COVID-19 pandemic.
  • Consideration of going concern in the preparation of pension scheme financial statements requires greater focus due to COVID-19.
  • Auditors should be considering the impact of the COVID-19 pandemic on all aspects of the audit and communicating with pension scheme trustees about these as appropriate.

ICAS, ICAEW and PRAG have published new joint guidance on pension scheme reports and financial statements, and related matters in the context of the COVID-19 pandemic

The guide is intended to support pension scheme auditors navigate the additional challenges they are likely to experience as a result of the COVID-19 pandemic.  Pension scheme trustees and accounts preparers will also find the guidance helpful.

David Fairs, The Pensions Regulator’s Executive Director for Regulatory Policy, Analysis and Advice, said: “We welcome this guide as a useful tool for auditors and trustees facing challenges or difficulties while producing and auditing financial statements during the COVID-19 pandemic. Financial statements are an important way trustees can show that their pension scheme is run properly and well governed.”

The guide is relevant to private sector occupational defined benefit (DB) and defined contribution (DC) trust-based pension schemes in the UK, including hybrid schemes and DC master trusts, applying Financial reports of pension schemes: A statement of recommended practice (the Pensions SORP), published by the Pensions Research Accountants Group (PRAG).

Pension schemes and their auditors should continue to apply existing standards and guidance and keep up to date with new COVID-19 related announcements and guidance from the Financial Reporting Council (FRC) and The Pensions Regulator (TPR).

To date TPR has announced easements in its approach towards the duties of trustees in certain areas, including obtaining audited financial statements and producing chair’s statements. However, these easements do not currently apply to periods ending on or after 31 December 2019.

The guide covers a wide range of topics including:

  • responsibilities for reporting to TPR
  • the impact of the COVID-19 pandemic on the control environment of pension schemes
  • the trustees’ report and the chair’s statement
  • going concern and the trustees’ assessment of going concern
  • accounting for scheme investments
  • events after the end of the reporting period
  • audit issues
  • the auditor’s statement about contributions.

Responsibilities for reporting to TPR

There is no relaxation of trustees’ responsibilities under the notifiable events regime and those running DC master trusts must continue to comply with their significant and triggering events duties.

In relation to the duties of trustees and scheme advisers to report matters of material significance, these should be viewed in light of TPR announcements regarding easements.

The impact of the COVID-19 pandemic on the control environment of pension schemes

The pension scheme annual reports, including financial statements, will be impacted by changes in the control environment in which schemes operate; the extent of the impact of the COVID-19 pandemic on the control environment of a scheme will depend on its reporting period end date.

For example, a scheme with a period end date of 31 December 2019 may not have experienced any COVID-19-related impacts on its control environment in the period to that date. However, it may have done subsequently and this may be relevant to elements of its annual report, including the financial statements.

The trustees’ report and the chair’s statement

Trustees should reflect on the impact of COVID-19 from a governance perspective on the content of their trustees’ report and other narrative elements of the annual report, such the Chair’s statement.

The going concern basis of preparation and the trustees’ assessment of going concern

Consideration of going concern in the preparation of pension scheme financial statements requires greater focus due to COVID-19.

The trustees are responsible for undertaking the going concern assessment and the assessment must meet the requirements of both the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the Pensions SORP.

The specific circumstances which need to exist for pension scheme financial statements not to be prepared on a going concern basis remain unchanged.  However, it is likely that more schemes may need to disclose a material uncertainty relating to going concern due to the impact of the COVID-19 pandemic.

Accounting for scheme investments

Financial instruments, including investments, must be held at fair value in the scheme’s statement of net assets.

There are indications that obtaining asset valuations for periods ending on or after 31 March 2020 will be challenging for some asset classes; for example, illiquid assets such as commercial property or private equity investments.

Where reliable valuations cannot be obtained, trustees and the scheme’s auditor should be discussing the implications for the scheme’s financial statements early in the production process. In these circumstances, the auditor may need to consider alternative audit procedures.

Trading conditions at the reporting date need to be considered to ensure that investments are disclosed appropriately as level 1, 2 or 3. For example, where market data is not available for investments normally classified (and disclosed) as level 2, it may be appropriate to re-categorise these at the reporting date as level 3.

A narrative disclosure should be included to explain the reason for any change in level from the previous year.

The trustees will need to review the nature and extent of risks arising from financial instruments and update the scheme’s fair value hierarchy investment risk disclosures, for example, to:

  • Emphasise their commitment to taking a long-term rather than short-term approach to the scheme’s investment strategy.
  • Refer to circumstances where de-risking elements in the scheme’s investment strategy have mitigated falls in the value of certain assets.
  • Report on any change in approach to investment risk as a consequence of the COVID-19 pandemic.

Events after the end of the reporting period

For pension schemes with accounting periods ending on 31 December 2019, the COVID-19 pandemic in 2020 is likely to be a non-adjusting event.

For subsequent reporting dates, schemes will need to judge how much of the impact of the COVID-19 pandemic should be considered to arise from non-adjusting events. This will be highly dependent on the reporting date, and the specific circumstances of the scheme.

For a pension scheme, a non-adjusting event after the end of the reporting period could be:

  • The significant decline in the value of investments.
  • The reduction or suspension of deficit recovery contributions or contributions for future service.
  • A delay beyond the statutory deadline for completing the triennial actuarial valuation and agreeing a schedule of contributions and, where applicable, a recovery plan based on that valuation.
  • The insolvency of the sponsoring employer.

Audit issues

Auditors should be considering the impact of the COVID-19 pandemic on all aspects of the audit and communicating with pension scheme trustees about these as appropriate. The guide highlights some of the key issues scheme auditors will likely need to address in respect of:

  • strategies and plans
  • materiality in planning and performing the audit
  • internal controls, assessing risks of material misstatement and accounting estimates
  • written representations
  • going concern, including the application of the September 2019 revision of ISA 570 (UK)
  • using the work of an auditor’s expert
  • subsequent events
  • the auditor’s report, including the auditor’s opinion
  • audit firms’ own risk management arrangements over signing auditor’s reports
  • the auditor’ statement about contributions.

Fundamental to the audit is the requirement to obtain sufficient appropriate audit evidence in order to complete the audit, form an opinion on the financial statements and issue an auditor’s report.  Audit evidence, and the documentation of that evidence, is therefore a theme throughout the ‘Audit issues’ section of the guide.

In addition to applying the ISAs (UK), pension scheme auditors should continue to refer to Practice Note 15 (revised): The Audit of Occupational Pension Schemes in the UK (November 2017) (PN15) as authoritative guidance.

The auditor’s statement about contributions

In undertaking work in relation to the auditor’s statement about contributions, the auditor will need to know whether contributions to the scheme have been impacted by:

  • the reduction or suspension of deficit recovery contributions or future contributions (DB only)
  • changes in pensionable earnings
  • the furloughing of employees under the UK government’s Coronavirus Job Retention Scheme.

Sufficient appropriate audit evidence about contributions to the scheme should be gathered as part of any audit work on the fund account.

Where contributions have not been paid in accordance with the schedule of contributions, or, in the case of a DC scheme the scheme’s payment schedule, during the reporting period, the auditor will need to consider the implications for their statement and whether in the course of their work they have identified any matters of material significance to report to TPR.


Our Guide should be read in conjunction with the most up-to-date guidance from TPR, the FRC and others relevant to the preparation of scheme annual reports and financial statements and audit.


Professional Development courses that may be of interest to you

An introduction to the audit of pension schemes

This course will provide an introduction to the issues to be considered during the completion of the audit of a pension scheme.

Find out more

Pension Scheme Accounts following FRS 102 and SORP – a half-day course

The course will consider the impact of the changes in pension scheme accounting and the experience gained to date on issues arising in complying with FRS 102 and the revised SORP.

Find out more

Relevant accounts for section 179 valuations due by 31 March 2020

By ICAS and ICAEW

30 March 2020

New Pensions SORP comes into force

By Liz Duffy, Policy Adviser, Pensions and Christine Scott, Head of Charities and Pensions

20 February 2019

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: