New Pensions SORP

Financial Reporting Exposure Draft, FRED 82 Draft amendments to FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review, has been published for consultation and comments were invited by 30th April 2023. The Pensions Research Accounts Group (PRAG) have responded, they raised a number of points but agreed with the proposed timetable. It is expected that the Financial Reporting Council will publish the revised FRS102 by 31 December 2023. This gives PRAG enough time to adopt the revisions in the Pensions SORP which is expected to have an implementation date of accounting periods commencing on or after 1st January 2025.

In October we learned that the revised suite of standards reflecting the second periodic review of UK GAAP is now expected to be issued in the first half of 2024, and implementation not before periods commencing on or after 1 January 2026, instead of 1 January 2025.

The FRC has taken this decision to allow more time as it considers significant responses to FRED 82. These responses included challenges faced by the pensions sector in recognising historic annuity policies at fair value and risk disclosures.

The FRED currently proposes changes to fair value measurement definitions, to reflect the principles of IFRS 13 ‘Fair Value Measurement’ – The impact of this change in the definition of fair value could potentially change how some investments are valued.

An amendment to pension scheme risk disclosures as follows: “A retirement benefit plan shall disclose information that enables users of its financial statements, to evaluate the nature and extent of credit risk and market risk arising from financial instruments, to which the retirement benefit plan is exposed at the end of the reporting period, and which may impact the ability of the plan to pay the promised retirement benefits to members.

Other potential changes that could feed into a new Pensions SORP include:

• master trust and consolidators
• refinement of hybrid disclosures
• further guidance on investment risk disclosures
• further guidance on information to be included in the Trustees’ Report
• reduced disclosures for smaller schemes

With the delay in issue and the extended implementation date, we await to see how these changes will feed into the new Pensions SORP.