Pension scheme annual reports: Government urged to amend regulations

The Joint Industry Forum on Workplace Pensions is calling on the Government to amend audited accounts regulations, in relation to the contents of the annual reports of pension schemes. The Pensions Research Accountants Group (PRAG) is urging organisations involved in the preparation and audit of these documents, to lend their support by forwarding a letter to The Department for Work and Pensions (DWP).

Pension scheme annual reports have become so long, in some cases longer than corporate annual reports, extending to over 200 pages. This length makes them unwieldy and costly to produce. Much of the information is published elsewhere, and by being duplicated in the annual report, the audited accounts are diminished in value. In fact, one of the most common criticisms of pension scheme annual reports is they are too long.

The key reason for the length is that the annual report has become a repository for the following.

• Annual Governance Statement for defined contribution schemes.
• Engagement Policy Implementation Statement.
• Climate Change Governance Reporting (either included in the annual report or there is a link to the statement on a publicly available website).
• Finally due to the requirements, many trustees include the whole Statement of Investment Principles in the annual report. 

The additional information referred to must be publicly available on a website; therefore including the same information within the annual report could be an unnecessary duplication. Trustees are also required to note the website addresses of these statements on their annual return to The Pensions Regulator (TPR).

Although the statements form part of the annual report, they are not part of the audited accounts and do not form part of the audit opinion. Auditors are obligated to review these statements; however, some (but not all) auditors are of the view that they do not need to review the Climate Change Governance Reporting information where there is only a link to this information in the annual report, whereas the other statements are reviewed but at a high level. This means the approaches are not only inconsistent but adds cost to the production of the report and accounts.

These statements are prepared by scheme advisers and are reviewed by the Trustees and often legal advisors. The time taken to produce and review these reports causes delays to the signing of the report and accounts. As a result, it means many annual reports are delayed and signed close to the statutory deadline, causing scheduling issues for Trustees, administrators, and auditors.

There is consensus throughout the pensions industry that the annual report is not the right place for these statements. This is demonstrated by the number of pension industry bodies that have sent the letter to the DWP.

It would be relatively straightforward to repeal or amend the relevant regulations. In their place, PRAG would include a requirement in the SORP for a reference to the publicly available website where these documents reside.

Shona Harvie, Partner and Director on the Pensions Research Accountants group (PRAG) executives comments:

“The Annual Report has become a repository for additional information required by the Regulations. The pensions industry calls on the government to remove duplicated information required by the Regulations from the annual report. Adding this information makes the report very lengthy, and this is one of its most common criticisms. In addition, this adds to the production cost and causes delays in signing the financial statements, adding no real value as the information is already publicly available.” 

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