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07 June 2012

NAPF: Financial reporting rules could burden large pension funds


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NAPF warned that proposals for new financial reporting rules could impose significant costs on pension funds by treating them like banks and insurers.


In its response to the Accounting Standards Board’s (ASB) consultation on the future of financial reporting, the National Association of Pension Funds (NAPF) raised concerns about the costs that the new disclosure requirements would create for large pension schemes.

The NAPF, which otherwise praised the plans for simplifying and consolidating the UK’s accounting practices, urged the Board to remove these requirements from the proposals. Under the plans, pension funds would have to disclose in their financial reports unnecessary detail about the financial instruments they use, such as derivatives and hedge funds. This would create major costs for large pension schemes with more complex investment and risk mitigation strategies.

The NAPF argues that pension funds would be subject to an unjustified level of disclosure. Pension funds would have to comply with the same disclosure requirements as banks and insurers, despite the very different purpose for which their financial statements are prepared. They would also have to disclose further actuarial information which is already available, creating an unnecessary duplication. 

Darren Philp, NAPF Policy Director, said: “The rules requiring pension funds to disclose their financial instruments offset an otherwise good set of proposals. Pension funds would face tough disclosure requirements starting from the wrong assumption that they are financial institutions like banks and insurers when in fact they are not. And on top of that, they would face further disclosure requirements specific to them, which would raise the bar even higher. We support greater transparency, but these new rules will do nothing to help scheme members and their advisers. Instead, they will increase the costs for large pension funds."

The NAPF is also concerned that the new disclosure requirements would unbalance the structure of the pension funds’ financial reports and confuse scheme members (employees and pensioners) for whom they are intended.

Press release

Full response



© NAPF - National Association of Pension Funds


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