As an employer participating in the Local Government Pension Scheme you may be required to disclose any pensions costs within your accounts, it is therefore vital to discuss with your auditors what, if any, your pension requirements will be in your financial reports.
The UK Accounting Standard states how pensions of defined benefit schemes are treated in the employer’s Profit and Loss and Balance Sheet accounts. These are known as your FRS102 or IAS19 reports.
LGSS Pensions can commission these reports, which are calculated by the actuary Hymans Robertson, using data from you as the Employer, LGSS Pensions and using certain methodology and assumptions.
Please note that there are costs associated with producing these reports and for each particular month there is a given time frame.
What are FRS102 & IAS19?
FRS102 and IAS19 are accounting standards requiring the disclosure of an organisation’s pension scheme liabilities. They require that scheme employers make provision for pension scheme liabilities on their balance sheet.
The FRS102 and IAS19 pensions liability calculations use different assumptions from those used in actuarial calculations undertaken at each triennial Fund Valuation to determine scheme employer contribution rates.
Why is my pensions deficit higher in my Accounting Reports?
Scheme employers will be aware from documentation provided by the Fund that the accounting assumptions used within the FRS102 and IAS19 processes are ultimately the responsibility of an organisation’s directors based on actuarial advice.
However, the discount rate, a key assumption used to place a value on pension liabilities, must be determined by reference to market yields on high quality corporate bonds at the reporting date.
There is no such restriction on the discount rate used within the triennial valuation process and, as such, the discount rate assumption used under FRS102 and IAS19 can vary considerably a) from that used when setting scheme employer contribution rates and b) from year to year.
Such an approach may lead to deficits reported on an FRS102 or IAS19 basis being considerably higher, or lower, than those calculated on a valuation basis.
As a result the FRS102 and IAS19 accounting disclosures has no direct linkage to the scheme employer contributions determined at each triennial valuation.
It is even possible for a scheme employer to be 100% funded on a valuation basis yet still have a significant deficit, or surplus, on an FRS102 or IAS19 basis.
- 2016 June Accounting for pensions in your financial statements 20 questions
- 2016 June Summer Assumptions
- 2016 March Accounting exercise – Assumptions and results commentary
- 2016 March Accounting Assumptions Briefing Note
For any questions or queries concerning the accounting figures please contact: PenContributions@northamptonshire.gov.uk.