The UK Department for Work and Pensions (DWP) has published new regulations that remove the need for UK pension funds to make what many experts see as largely redundant investment disclosures.
The new disclosure regime takes effect from 1 April and affects disclosures by pension funds rather than corporate scheme sponsors.
Advisers who spoke to IPE welcomed the move, not least because it aligns the statutory disclosure regime with UK GAAP.
Philip Briggs, a partner in RSM’s pensions group, said: “This is a positive move to reduce the red tape surrounding disclosure requirements for pension schemes.
“Previously, quite a lot of the disclosure requirements were driven by legislative rather than accounting requirements.
“As the accounting requirements have developed, the legislative requirements have become more unnecessary and outdated, so it now makes sense to align the two.”
Kevin Clark, an associate partner at KPMG in the UK, added that the way was now clear for pension schemes to take a more focused approach to pension scheme investment disclosures.
“It is the start of an exciting new era,” he said. “It draws a line under rule changes and sees us move into an era of more relevant and meaningful reporting for pensions schemes.”
Clark chairs the Pensions Research Accountants Group working party, which identified the need to remove the now outdated disclosure regulations.
He added: “It enables us to take full advantage of the principles-based disclosure regime in FRS 102 and the SORP guidance.
“This encourages trustees and scheme accountants to make the most meaningful disclosures possible in scheme accounts based on investment strategy.”
The removal of the disclosures follows a recent consultation by the DWP.
That process was prompted by the decision of the UK’s audit regulator, the Financial Reporting Council (FRC), to embark on a major project to consolidate UK GAAP into a single accounting standard, FRS 102.
This move forced the FRC to update the Statement of Recommended Practice (SORP) that governs pension fund disclosures.
Although FRS 102, a modified version of the International Financial Reporting Standard for Small and Medium-sized Entities, deals with pensions accounting, the SORP provides a layer of recommended practice on top of that.
Since the last update to the SORP in 2007, the UK pensions landscape has seen the introduction of auto-enrolment and a growing number of pension schemes entering the Pension Protection Fund.
The FRC’s actions left the DWP’s investment disclosures largely redundant.
“We very much welcome the change in legislation,” Clark said, “because it clears the decks for the new disclosures that come in under FRS 102 and the revised SORP.
“We don’t have the double whammy of having to deal with the new disclosures and the historic disclosures, which were widely recognised as being no longer fit for purpose.
“Most schemes are moving into their end of March reporting, and this change means any accounts signed after this date, even if they reference the 31 December year-end, can take advantage of the removal of the disclosures.”
Meanwhile, the FRC has announced it wants to receive comments on FRS 102 ahead of reviewing the standard in 2018.
In a statement, FRC director Melanie McLaren said: “[W]e are providing an opportunity, now, for those interested in financial reporting to give feedback as they are preparing their first financial statements complying with the new standards.
“Providing feedback this year will be an important first stage in shaping the future development of the standards.”