Pension trustees to face reporting challenges amid market volatility

Pension scheme trustees should take action now to facilitate discussions with auditors and smooth the accounts approval process, RSM UK has said, warning that the current market uncertainty could present a further challenge for trustee boards.

The firm stated that the current market uncertainty comes at a peak time for signing pension scheme accounts, as the annual reporting deadline is 31 October for accounting years ending on 31 March, and 5 November for those ending on 5 April.

It explained that although trustees may expect the routine process to be a straightforward item on their agenda, recent events have made it more complex, with trustee boards therefore urged to take action now.

In particular, RSM UK encouraged trustees to ensure auditors have all the relevant information to enable them to document their own conclusions and share expectations of any accounting disclosures or concerns, and that auditors are provided with current asset valuations, dated after 30 September 2022.

The firm explained it can be a challenge for accountants as pension scheme financial statements only reflect the net asset position, whereas the trustee board and their advisers focus on the funding/solvency position.

According to RSM UK, this means that, where the liability driven investment (LDI) strategy is significant, monitoring and reporting processes are focussed on the net liability position.

Trustees were also urged to consider the accounting implications of how much the scheme is exposed to current volatility, including to what extent the scheme follows an LDI strategy, whether the scheme is subject to direct collateral call requirements, and any exposure to investments that could have suffered a significant loss due to interest rate conditions.

RSM UK pensions audit partner, Philip Briggs, stated: “Many trustee boards will have assumed that the approval of their accounts would be a routine process, but recent events mean trustees will need to consider two key areas now which are likely to be affected – events after the reporting date, and going concern.

“For events after the reporting dates, trustees should ensure that narrative disclosure is provided to meet the financial reporting requirements and ensure consistency with any other wider narrative to members.

“Trustees might have thought that the normally routine process of finalising and approving the annual report and accounts was the only straightforward item on their agenda, but recent events have made this a complex process, so an early and open dialogue with auditors is recommended to help get the task done more easily.”

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