New Pensions SORP

A new Pensions Statement of Recommended Practice (SORP) is being introduced primarily to align pension scheme financial reporting with the latest changes to the financial reporting standard FRS 102, but in addition to reflect recent industry and regulatory developments since the last edition.

The Pensions Research Accountants Group (PRAG), which develops the Pensions SORP, was last updated in 2018. The 2025 version (expected to be finalised in early 2026) is effective for scheme years beginning on or after 1st January 2026.

Key Drivers for the New SORP

• The new SORP primarily aims to align with amendments to FRS 102 from the Financial Reporting Council’s second periodic review.
• It mainly considers developments within the pensions industry, including changes in investment strategies, end game considerations and disclosures for schemes in surplus.  
• The update seeks to improve the clarity and comparability of financial reports for members, and incorporates stakeholder feedback from the consultation period, which closed in September 2025.  

The updated SORP includes several specific changes:

• The fair value methodology has been reworded. Schemes will continue to use bid pricing for investment valuation as the preferred basis.
• The option to use annuity provider valuations is being removed due to transparency concerns. It’s a prospective change and will require schemes to have annuities valued by the Actuary.
• There is increased narrative relating to information included in the investment reconciliation table, such as defining income and capital elements of distributions, disclosing annuity income included, and providing values of movements that relate to switches between funds. Derivatives will now be shown on a net basis.
• There are new disclosures required on surpluses used to fund contributions or returned to the sponsoring employer.
• Risk disclosures are now enhanced to require trustees to include liquidity risk. The new SORP also requires the indirect risk disclosures for pooled investment vehicles, to be analysed by underlying asset class.
• Additional guidance is provided on going concern, particularly in situations of employer insolvency or PPF assessment periods.
• Outdated statutory disclosures regarding investment types have been removed to simplify reporting.

We will work with Trustees and Advisers to ensure that the new disclosure requirements are adhered to in the Pension Scheme Financial Statements.