Pension schemes and related parties

Under Auditing Standards applicable in the UK there is a renewed focus on related parties of schemes and potential transactions with them.

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Matthew Maneely
Published: 16 Oct 2017 Updated: 13 Jun 2022

Under Auditing Standards applicable in the UK there is a renewed focus on related parties of schemes and potential transactions with them. As a result, auditors are required to ask trustees for a complete list of related parties to their scheme - not merely those that the scheme has transactions with, as shown in the accounts.

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Related parties of the scheme include:

a) Trustees, or directors of a corporate trustee;
b) Close families of Trustees, or directors of a corporate trustee (close family members’ are defined as children, spouse or domestic partners and the children of the spouse or domestic partner, along with any other dependants);
c) Entities controlled by, and associates and joint ventures of, the scheme itself;
d) Each participating employer;
e) Companies and businesses controlled by, or under the same control as, the sponsoring employer;
f) Companies and businesses controlled by the trustees or their close families;
g) Companies and businesses controlled by the key management of a corporate trustee, or their close families;
h) Other pension schemes that have a majority of trustees in common with the scheme;
i) Other pension schemes for the benefit of employees of companies and businesses related to the employers, or for the benefit of the employees of any entity that is itself a related party of the reporting pension scheme.

Related party transactions

A related party transaction is defined as a transfer of resources, services or obligations between a scheme and a related party, regardless of whether a price is charged.

Disclosure of transactions and balances As a minimum, disclosure of transactions with related parties and balances should include:

a) The amount of the transactions
b) The amount of outstanding balances and:

i. Their terms and conditions, including whether they are secured, and the nature of the consideration to be provided in settlement; and
ii. Details of any guarantees given or received.
iii. The expense recognised during the period in respect of bad or doubtful debts due from related party transactions.

Examples of recent discussions we have had to help clients understand their obligations under the new standards include talking about:

- Close family members of trustees who are members of the scheme in their own right; and
- Service companies owned by a trustee providing services to the scheme.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.