Pensions scheme year end planning

Be prepared and save money

It is around this time of year that many trustees will be starting conversations with their accountants and auditors about the year-end accounts. Good preparation and planning are essential to a smooth financial reporting process and trustees should give some thought in advance to key aspects of the process. This can be considered under the following headings:

• Changes in the year
• One- off events
• Deadlines that need to be met

This should not be a time consuming exercise as the information should be readily available and by dealing with these issues in advance there is a potential cost saving.

We have set out some of the issues that may be relevant under each of the headings:

Changes in the year

Trustees will be asked about changes, but planning ahead means that a comprehensive list may be prepared in advance. The list may include:

• Changes in investment strategy or managers
  The accountant needs to contact the right parties for financial information and changes may need to be disclosed in the trustees’ report
• Revised processes for any aspect of the operation of the scheme
  This is primarily of relevance to the auditor, but it could also impact on the sources of information for the scheme accountant.
• Changes to the rules
  Although strictly this does not need to be disclosed in the annual report, it is best practice to do so and it is important to have all of the relevant amending documentation available. In any event, it is likely to impact on the work of the auditor.

One-off events

Trustees should be given the opportunity to raise any concerns that they have so that the scheme accountant or auditor can make sure that they are addressed. For example:

• Basis of valuation of investments following the volatile investment market
  The scheme accountant will need to consider the disclosure implications of any illiquid investments. It is also possible that specialist valuations may be required for certain asset classes.
  Many schemes disclosed departures from the Statement of Investment Principles in 2008/09. Although it is not a strict disclosure requirement, best practice would be for the trustees to disclose the effectiveness of action taken to correct the position.
• Concerns over exceptions disclosed in third parties’ internal control reports
  As a result any exceptions disclosed the trustees may have concerns over certain transactions that impact their scheme accounts, e.g. benefit calculations. If they do, this should be discussed with the auditors as they may be able to address these concerns as a part of their work.

Deadlines that need to be met

Timely actions convey good governance to the members. Trustees should consider:

• Timing and frequency of meetings
  The auditor’s work should only commence after the trustees have indicated their agreement to the draft financial statements and proper consideration has been given to the proposed scope of the auditors’ work.

This ensures that the scope of the audit work is understood by the trustees and that any concerns the trustees have are properly addressed.

The trustees should also make themselves available to consider and resolve any issues arising during the course of the audit work.

The trustees should also allow time for the proper consideration and approval of the annual report and financial statements. Sufficient time should also be allowed for discussion of the management report from the auditors.

• Communication with members
  Communication with members is important and many trustees issue popular reports. As these may include extracts from the annual report and the audited financial statements as well as information from other sources, a clear communication plan is needed to ensure timely receipt by the members.

Final thoughts

Trustees usually delegate the preparation of the accounts to others and the auditor is always independent of the accounting process. However, the trustees remain responsible for the annual report and financial statements and by working with the accounting and audit teams they can gain maximum value from the year end process whilst making it relatively painless.