NAPF criticises 'unnecessary detail' demanded in new UK accounting standards

UK - Planned new financial reporting rules could prove expensive for UK pension funds as the institutions find themselves treated the same as banks and insurers, the National Association of Pension Funds (NAPF) has warned.

Darren Philp, policy director at industry body, said: "The rules requiring pension funds to disclose their financial instruments offset an otherwise good set of proposals.

"We support greater transparency, but these new rules will do nothing to help scheme members and their advisers," he said. "Instead, they will increase the costs for large pension funds."

The NAPF was responding to the Accounting Standards Board's (ASB) consultation on the future of financial reporting, which would expand the accounting treatment already employed by listed UK companies to those not already complying with International Financial Reporting Standards.

Philp said pension funds would face tough disclosure requirements, which wrongly assumed they were financial institutions such as banks and insurers.

If the plans were accepted as they are, pension funds would have to disclose "unnecessary detail" about the financial instruments they use, such as derivatives and hedge funds, the NAPF said.

This duty would create significant costs for large pension schemes where investment and risk mitigation strategies were more complex, it added.

Additionally, the funds would have to make further disclosure requirements specific to them, which would raise the bar even higher, Philp said. Since the additional actuarial information was already available, this would result in an unnecessary duplication.

"The Accounting Standards Board should remove pension funds from the category of financial institutions and eliminate the additional disclosure requirements," Philp said.

"The existing disclosures are perfectly adequate as they are."

The ASB proposals are for three new financial reporting standards to simplify and consolidate UK Generally Accepted Accounting Practice (UK GAAP). The new rules are set to take effect on 1 January 2015.