A consolidated effort towards year-end pension disclosures

By Adam Poulson, Associate – Corporate Consulting, Barnett Waddingham LLP

For many companies, the dust is starting to settle on another reporting year-end. Now is a great time to take stock and consider how the year end process has gone. Invariably, lessons can be learned and efficiencies identified for future years.

One area that can involve considerable effort and expense relates to the reporting of post-retirement benefits. In particular, where there are multiple pensions arrangements based in different countries, these challenges are compounded – it is unusual for the sum of the constituent parts to add up to anything less than a big headache.

Overseas complications

For firms with overseas operations, it can take a considerable effort to consolidate overseas pension schemes and other post-retirement plans. The process involves multiple arrangements, many of which may be legacy schemes or related to subsidiaries acquired through local business growth.

There are a number of challenges ranging from currency differences to the variety of approaches adopted by advisers in different territories. With limited experience of overseas pension arrangements, it can be more difficult for the finance team to work efficiently with unfamiliar reports. The efforts involved in bringing together a variety of separate obligations can be an unwanted diversion at a time when the finance function is already under a great deal of pressure.

Further complications may arise when it comes to the audit – multiple reports from different advisors in different currencies will lead to a protracted process. A client recently shared with us that around 30% of their group audit process was in respect of global post-retirement pension and benefit arrangements. Such a level of involvement may feel unwarranted particularly when related to frozen or legacy pension schemes.

However, there are options available to take the pain out of the consolidation process, and enable the finance team and auditors to focus on what really matters.

Global consolidation – bringing it together

The introduction of an external party to assist with the year-end consolidation process can lead to material savings in terms of time and cost. Support may range from providing assistance with consolidating the figures, often using an online consolidation system, to helping with the whole process from setting the assumptions, delivering a fully consolidated disclosure report and answering any audit questions.

Online consolidation systems provide easy access to the disclosure figures broken down by country or by divisions within the wider corporate group. The set-up can be modified over time to cope with changing needs or requirements. Such a system ensures that access to all plans and consolidated figures are available online at the click of a button.

A fully consolidated report can drastically reduce the level of audit, and hence cost, required. An external specialist can also act as a single point of contact for the finance team and auditors to liaise with – ensuring questions are answered quickly and first time.

Overall, the use of an external service to consolidate pension scheme arrangements should make the disclosure process smoother and less costly.

So when you are reviewing the year-end reporting process and considering how you might improve it for next year, it is worth thinking about the pension consolidation process. With some expert assistance you can ensure that pension disclosures come in on time and on budget allowing you and your team to focus on more pressing actions at the year end.