The conflict in Ukraine has had an impact on the volatility of Pensions and Investments.
Trustees will need to consider:
Their Fiduciary Duty
To act in line with the Trust deed and Rules, to act in the best interest of scheme beneficiaries, to act impartial, to act prudently, responsibly and honestly, the Trustees powers – which include the investment strategy.
Whilst you should prioritise your fiduciary duties, you should also consider your members’ personal views alongside the environmental, social, and governance policy or statement (DC) and your Statement of Investment Principles.
There are also sanctions and governance requirements that may lead you to decide that disinvestment is in line with your fiduciary duties.
The pensions regulator has published guidance on the conflict in Ukraine and also invites schemes to contact them, if they or their sponsoring employer, are suffering significant issues or challenges as a result of the ongoing conflict.
The Financial Conduct Authority has also issued a paper explaining the new financial sanctions in relation to Russia. With useful links for further information:
In terms of accounting and the statutory audit, you need to consider:
Impairments of Investments
If it isn’t practical to disinvest Russian assets immediately, it is necessary to consider an impairment in the financial statements. With cash and investments frozen by Western banks, this would give rise to an impairment indicator.
Strength of the Employer Covenant
The additional pressures here are with companies that trade or have assets in Russia, Ukraine and Belarus. However, the effect of rising inflation rates, interest rates, fluctuations in foreign exchange rates and the financial markets will be felt by all.
Post Balance Sheet Events
The ICAEW has issued guidance which states that for those entities with a 31st December 2021 year end or prior, the conflict is deemed to be a non adjusting post balance sheet event. Trustees will need to consider the disclosures around this, and the related estimate or monitoring, and conclusion of its financial effect.
If you are unsure of the accounting implications for your scheme, please get in touch with one of the Ensors Pension team.