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Background to the assurance reporting framework

In 2009, we issued a consultation paper on how we proposed to change how we assess some of the judgment-based conditions for acceptance onto the Trustee Register.

One of the requirements this consultation addressed was for trustees on the Trustee Register to have ‘sound administration and accounting procedures’. To help inform this judgement-based decision we indicated in our consultation that we would be adopting an assurance reporting framework to help inform this condition, and most responses were in favour of this proposal.

We must be satisfied that the applicant, operates, and continues to operate, ‘sound administrative and accounting procedures’.

We have now developed this assurance reporting framework with the Institute of Chartered Accountants in England & Wales (ICAEW). The Audit and Assurance Faculty (AAF) of the ICAEW issues good practice guidance for performing assurance engagements on various aspects of operations provided by external organisations. The Supplement resulting from this collaboration has been shared with the equivalent bodies in both Scotland and Ireland.[1]

The ICAEW has published a supplement which provides guidance to trustees who adopt it (referred to as the Relevant Trustee[2] in supplement) and reporting accountants on assurance reporting on the trustee’s internal control procedures. This is with reference to a set of control objectives set out in appendix to this supplement.

For the avoidance of doubt, the control procedures subject to the supplement the reporting accountants will report on are those procedures in relation to the trustee’s own business operations for providing pension trustee services.

Footnotes for this section

    [1] Namely the Institute of Chartered Accountants of Scotland and Chartered Accountants Ireland. For the avoidance of doubt, the requirements of trustees wishing to be included on the Trustee Register, including by reference the application of the Supplement, apply in England, Wales, Scotland and Northern Ireland.

    [2] An entity that, as part of its business, as a trustee offers pensions trustee services in relation to trust schemes and who either is on the Trustee Register or adopts this framework voluntarily.

Application of the assurance reporting framework

To demonstrate that they fulfill this criteria to be on the Trustee Register, we require trustees to obtain an unqualified independent assurance report from a reporting accountant upon application and on an annual basis. The assurance report must:

  • be for no less than 12 months
  • be obtained at least once a year
  • start the day after the end point of the previously submitted report.

The report must be submitted by one of the following annual submission dates:

End of assurance reporting period Annual submission date
1 January to 30 June 30 September
1 July to 31 December 31 March

This report will cover, at least, all of the control objectives detailed in the appendix to the supplement. Trustees may wish to put in place other control objectives. We use the assurance report to help us determine whether the legal requirement to have ‘sound administrative and accounting procedures’ has been met.

For new applicants we will require an assurance report for a period or a point in time ending or falling respectively within the six months before the submission of their application. There may well be transitional requirements applied to successful applicants up to the first two years they are on the Trustee Register. We will discuss these with the applicant.

However, after the transitional requirements the applicant will be expected to submit an annual assurance report as detailed above. In any event we encourage potential new applicants to discuss these issues and their application generally before they submit their application.

Qualified reports

We do not expect it to be common but if a trustee receives a qualified assurance report they must let us know as soon as is possible and not wait until the submission date.

When notifying us we expect the trustee to explain the reasons for the qualification and the steps being taken to address the areas subject to the qualification.

We will consider the materiality of these qualifications and the reasonableness of the steps being taken to address them as part of our consideration of what (if any) action to take. 

Voluntary adoption

We also consider that the assurance framework, as outlined in the ICAEW supplement, will be useful for trustees who provide trustee services by way of business but who do not wish to be on the Trustee Register.

We would encourage – as good practice – these trustees to voluntarily adopt the supplement to help demonstrate that they operate ‘sound administrative and accounting procedures’. In this situation not all of the control objectives may be directly applicable in this circumstance. Trustees who voluntarily adopt this framework and who are not seeking appointment on the Trustee Register should identify which of the control objectives set out in appendix to the supplement apply as well as any others.

The responsibility of trustees

Trustees must evaluate their control procedures, by reference to the principles and control objectives outlined in appendix to the supplement (PDF, 185kb, 27 pages).

Paragraphs 21 to 22 of the supplement makes clear that not all of the trustee’s business activities need be considered when evaluating whether the trustee’s control procedures meet the control objectives.

The trustee should be able and prepared to demonstrate to the reporting accountant why their control procedures are reasonable and proportionate. Particular considerations should be given to:

  • the extent of its own business operations for providing pension trustee services;
  • the size of its overall business operations; and
  • where it considers that full implementation has not been possible given the nature of its appointments and it may not be possible to assess operational effectiveness of certain controls procedures, to the extent they indicate that control objectives are being met.

See paragraphs 29 – 31 of the supplement (PDF, 185kb, 27 pages).

There may be situations where a control objective and supporting control procedures have limited applicability to a trustee. For example, previously there has never been a need to put them into practice and may be directly attributable to the nature of a trustee appointment. These cases may arise where:

  • the trustee is a sole practitioner; or
  • the trustee is appointed to a trustee body alongside a number of other trustees (where the trustee has no other appointed co-trustees we refer to this trustee as a sole trustee).

Download the supplement from the ICAEW website (PDF, 185kb, 27 pages).

Application of control objectives where the trustee is a sole practitioner

The regulator considers that where the trustee is a sole practitioner they should comply with all of the control principles. However, we recognise that this may well involve the sole practitioner trustee having to put in place certain arrangements which will enable this requirement to be met. There may be alternative approaches, or control procedures, that these trustees may wish establish and operate to ensure that the control objectives are met. One option the trustee may wish to consider may include is setting up mutual support and arrangements with other individuals or businesses offering pension trustee services.

Control objectives that may require such arrangements are likely to include, but not limited to, 3, 4, 7, 16 and 19 of appendix to the supplement. All these control objectives are relevant when an assurance report is obtained for the purpose of applying to be on the Trustee Register.

Application of control objectives to the trustee who is not a sole trustee

The application of certain control objectives for appointments (other than sole appointments) will sometimes be constrained by the constitution of the trustee body. The regulator recognises that a trustee may not be able to demonstrate the suitability and/or operational effectiveness for certain control objectives in these circumstances, where for example the trustee body does not adopt control procedures of the trustee.

Control objectives that may fall into this category are likely to include, but not limited to, 6, 11, 12, and 14 of the appendix to the supplement. However, all these control objectives are relevant when an assurance report is obtained for the purpose of applying to be on the Trustee Register; and we would expect relevant trustees to design and document control procedures.

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