Pension scheme accounts and the SORP

Trustees of most occupational pension schemes must obtain audited accounts within seven months of the end of each scheme year. Those accounts follow FRS 102 Section 34 and the Pensions SORP: a fund account and a statement of net assets valued at fair value, with investment risk disclosures, but deliberately no liability for the pensions promised to members, which are reported separately by the actuary.

Which schemes need audited accounts, and by when?

The Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 require trustees or managers, where the scheme must appoint an auditor under section 47(1)(a) of the Pensions Act 1995, to obtain two documents not more than seven months after the end of each scheme year:

• accounts prepared under regulation 3 and audited by the scheme auditor; and
• the auditor’s statement about contributions under regulation 4.

The Pensions Regulator’s code adds that accounts do not need to be sent to it as a matter of course, that an auditor’s statement must still be prepared even where no contributions were payable in the period, and that documentation on preparing the accounts should be kept for at least seven years. A scheme year is normally 12 months, but may run between six and 18 months when the start date changes or the scheme is being wound up.

There are carve outs. Ear marked schemes, where all benefits other than death benefits are money purchase and fully secured by allocated insurance policies, do not need audited accounts; instead trustees provide the insurer’s accounts on request and give each member a statement of contributions within 12 months of the year end. The contributions statement is not needed for a scheme year in which the scheme had at least 20 participating employers on the first day. Failing without reasonable excuse to obtain the accounts or statement can lead to a penalty of up to £5,000 for an individual and £50,000 in any other case.

What must the accounts show?

Regulation 3 requires the audited accounts to give a true and fair view of the financial transactions of the scheme during the year, the amount and disposition of its assets at the year end, and its liabilities, other than the liabilities to pay pensions and benefits after the end of the year. Regulation 3A then lists specific content, including:

• particulars of any investment, other than UK government securities, that is more than 5% of the scheme’s net assets;
• the percentage of resources in employer related investments and, where this exceeds 5%, further detail;
• total purchases and total sales of investments in the year; and
• a statement whether the accounts follow the relevant financial reporting framework for occupational pension schemes and, if not, where there are material departures.

That last statement is the hook for the SORP. In practice, the framework is FRS 102 together with the Pensions SORP, and the auditor reports on whether the requirements have been met.

How does FRS 102 shape the accounts?

FRS 102 deals with retirement benefit plans at paragraphs 34.34 to 34.48. A plan’s financial statements contain a statement of changes in net assets available for benefits, often called the fund account, a statement of net assets available for benefits, and notes. Paragraph 34.37 lists what the fund account shows: employer and employee contributions, investment income, other income, benefits paid or payable, administrative and other expenses, taxes on income, gains and losses on investments, transfers in, and payments to and on account of leavers.

Net assets are measured at fair value, with changes in fair value going through the fund account. The statement of net assets shows assets and any liabilities other than the actuarial present value of promised retirement benefits. Paragraph 34.47 confirms that a defined benefit plan is not required to recognise a liability for those benefits. Instead, paragraph 34.48 requires a report alongside the accounts giving the actuarial present value of promised benefits from the most recent valuation, the date of that valuation, and the significant assumptions and method used.

The disclosure focus is on investments. Plans must disaggregate net assets by class of financial instrument, analyse fair value measurements into the three level hierarchy, and explain the nature and extent of credit and market risk, including exposures, objectives and processes for managing them, and changes from the prior period. Fair value levels are explained in fair value measurement.

What is the Pensions SORP and what changed in 2026?

The SORP, Financial Reports of Pension Schemes, is issued by the Pensions Research Accountants Group, which the FRC recognises as the sector’s SORP making body. ICAEW reports that the 2026 Pensions SORP was published in March 2026 and is effective for all periods commencing on or after 1 January 2026, updating the 2018 SORP for the revised FRS 102 and later legislation and scheme developments.

The consultation draft, as summarised by ICAS, proposed that schemes keep using bid prices for fair value, removed the option to rely on annuity valuations supplied by insurers, required liquidity risk disclosure extended to capital commitments and potential collateral calls, and extended look through fair value level disclosures to sole investor pooled arrangements. Trustees and preparers should check the final text for how each proposal was settled, but the direction of travel is clear: more transparency on illiquid and complex investments.

What goes in the annual report around the accounts?

Under regulation 12 of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, trustees must prepare a document containing the information in Part 2 of Schedule 3 within seven months of the end of each scheme year, and give it within two months to any relevant person who asks within five years. Part 2 includes the audited accounts or auditor’s statements, the actuary’s certificate on the schedule of contributions where Part 3 of the Pensions Act 2004 applies, and the general scheme information in Part 5. Part 5 covers the trustees, advisers, numbers of active, deferred and pensioner members, discretionary pension increases, transfer value calculations and a statement whether the accounts were prepared and audited as the regulations require.

The Regulator suggests trustees consider publishing the accounts on a website free for members to access. How employers account for the same scheme in their own accounts is a different exercise, covered in accounting for defined benefit pension schemes.

What does a fund account look like?

Illustration only. A defined benefit scheme starts the year with net assets of £50.0 million.

Fund account item	£m
Employer contributions	2.0
Employee contributions	0.3
Benefits paid	(2.5)
Payments to and on account of leavers	(0.4)
Administrative expenses	(0.2)
Investment income	1.1
Change in market value of investments	1.7
Net increase in the fund	2.0

Closing net assets are £52.0 million. That figure says nothing about whether the scheme is fully funded. The actuarial value of the promised pensions appears only in the separate report required by paragraph 34.48, so a reader must look at both to judge the position. The employer contributions line is what the auditor’s contributions statement tests against the schedule of contributions.

What mistakes come up most often?

• Reading net assets as a funding level. The accounts exclude the liability for promised benefits by design.
• Missing the seven month deadline, which applies to both the accounts and the contributions statement.
• Skipping the contributions statement because nothing was payable, when the code still expects one.
• Overlooking concentration disclosures for single investments above 5% of net assets and for employer related investments.
• Using insurer annuity valuations without the information needed to support estimate disclosures and the audit.

For the audit process itself, see how a statutory audit works. Tax relief on contributions paid into schemes is covered in pension contributions and tax relief for business owners.

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Related Accountapedia entries

• Multi employer pension schemes
• Accounting for retirement benefits to LLP members
• Liability for a pension deficit funding plan
• The further and higher education SORP
• Accounts for charitable incorporated organisations

Sources

• legislation.gov.uk: SI 1996/1975
• The Pensions Regulator: Audit requirements
• Financial Reporting Council: Frs 102
• Financial Reporting Council: Sorps
• ICAEW: Pension schemes
• ICAS: Pension schemes statement of recommended practice consultation launche
• legislation.gov.uk: SI 2013/2734, regulation 12
• legislation.gov.uk: SI 2013/2734, schedule 3

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.