The Pensions Regulator

Discussion opened on pension scheme report and accounts

Ref: PN06-20
2 June 2006

The Pensions Regulator has today published a discussion document: Review of the form and content of pension scheme report and accounts.

This sets out the findings of a working group chaired by the regulator, which included wide representation from industry experts.

The regulator welcomes comments on this discussion paper, and feedback received will inform the work of the Pensions Research Accountants Group (PRAG), who plan to issue an Exposure Draft later in 2006 which will lead to a revised Statement of Recommended Practice (SORP).

Responses will also feed into the Accounting Standards Board's research project into pensions accounting.

The regulator welcomes comments from the industry on the proposals, including:

Inclusion of a governance statement in the annual report and accounts

Under this proposal, the trustees' annual report would include a governance statement that would cover such aspects as the extent and nature of trustee training and the effectiveness of risk management procedures.

Removal of miscellaneous compliance disclosures

The removal of the requirement for miscellaneous compliance disclosures (often grouped together into a compliance statement) should make room for more important disclosures, such as a governance statement.

Defined benefit schemes: Inclusion of a statement on the employer covenant and the funding position

Where the scheme provides defined benefits, the proposal made here is that the report should include an informative statement on the funding position of the scheme.

Inclusion of the recovery plan in the report and accounts

Given the importance of clear communication on funding there are good arguments for including either extracts or all of the recovery plan within the funding section of the annual report.

Defined contribution schemes: Enhanced investment disclosure

For members of DC schemes, disclosure of investment performance is of particular importance in terms of which funds are performing well or less well. A one, three and five year performance history might provide the balanced overview required.

John Ashcroft, head of strategy at the Pensions Regulator and member of the Pensions Advisory Panel of the Accounting Standards Board, said:

"We have identified the key stakeholders, set out what we understand are their information needs, outlined what they presently receive, looked for gaps in the existing framework and set out proposals for filling those gaps.

We are inviting comments on a possible package of measures to meet these needs and for feedback on the likely impact on cost."

Comments on the discussion document should be sent to: repacct@thepensionsregulator.gov.uk by 25 August 2006.

Editor's notes

1. The discussion document was produced from the findings of a working group chaired by the regulator to review the content of pension scheme accounts - this included wide representation from industry experts. The review set out to consider what implications the most recent changes have for pension scheme reports and accounts, and whether these still meet the needs of the users.
2. The Pensions Research Accountants Group (PRAG) has the approval of the Accounting Standards Board (ASB) to issue Statements of Recommended Practice (SORPs) for pension schemes. A Pensions SORP was first issued in 1986 and has been amended twice in 1997 and 2002 to reflect changes in pensions legislation and financial reporting standards.
3. Comments received from the discussion document will inform the work of PRAG for its review of the pension SORP. SORPs supplement accounting standards and legal and regulatory requirements. PRAG plans to issue an Exposure Draft later in 2006 which will lead to a revision of the Pensions SORP.
4. The Pensions Research Accountants Group (PRAG) is an independent research and discussion group for the development and exchange of ideas in the pensions field. More information on their work is available at http://www.prag.org.uk/.
5. Responses will also feed into the Accounting Standards Board's Research Project into Accounting for Pensions.The Accounting Standards Board (ASB) announced its research project into the financial reporting of pensions on 14 October 2005. For further information visit www.frc.org.uk/asb.
6. The role of the Accounting Standards Board (ASB) is to issue accounting standards. It is part of the Financial Reporting Council (FRC).
7. The Pensions Regulator is the regulator of work-based pensions in the UK, with wide ranging and flexible powers under the Pensions Act 2004.
8. The powers of the Pensions Regulator include the ability to:
   • collect more detailed scheme information;
   • issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
   • freeze a scheme that is at risk, while the regulator investigates; and
   • prohibit trustees who are judged not fit and proper to carry out their duties.
   • The Pensions Act 2004 also imposes a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator.