The 2026 Statement of Recommended Practice (SORP), Financial Reports of Pension Schemes, published by the Pensions Research Accountants Group (PRAG) on 9 March 2026, is effective for accounting periods beginning on or after 1 January 2026.
The SORP was last reviewed in 2018, and the updated and revised publication ensures that recommended accounting practice for pension schemes continues to align with UK Generally Accepted Accounting Practice, namely the Financial Reporting Standard FRS102, as well as current pension legislation.
The 2018 SORP included example pension scheme accounts for the first time. These were well received by trustees, pensions accountants and third-party administrators. The 2026 SORP has enhanced the example template and widened the illustrative examples and the scope of the content into areas that haven’t previously been covered. It is now a more relevant and user-friendly source of reference.
For those preparing financial statements for occupational pension schemes, a number of presentational changes will be required as a result of the 2026 update. In addition, revisions to certain reporting areas will mean changes for many pension schemes. Some will have more impact than others.
2026 Pension SORP key changes
1. Valuation of bulk buy-in policies and secured annuities
There has previously been a choice between using actuarial valuations or annuity providers’ valuations for arriving at the “fair value” for inclusion in each year’s financial statements. The SORP removes the option to use annuity provider valuations.
This will particularly impact schemes which have moved to buy-in and are currently using the buy-in providers’ valuation as a measure of fair value. Run-off budgets may need to be revisited to include actuarial valuation work. This is because the insurers’ valuations have often been provided at no cost, which is unlikely to be the case for valuations carried out by scheme actuaries.
In addition, a valuation (for accounting purposes) will also be required at the date of transfer out of the scheme - for example, at the point the buy-in moves to buy-out, or when individual secured policies are assigned to members.
2. Investment risk disclosures
Investment risk disclosures have been expanded to include liquidity risk and sole-investor pooled arrangements. The example Annual Report includes a useful table giving pooled arrangement notice periods.
This follows the September 2022 gilt crisis, when some schemes experienced difficulty meeting collateral calls on their liability-driven investment portfolios. The new disclosure requirement should prompt trustees to consider the extent to which a liquidity risk exists and how this risk is managed in practice.
3. New guidance on accounting for use of scheme surpluses
The 2026 SORP includes new guidance on accounting for the use of scheme surpluses - an area not addressed in previous SORPs.
This is a timely introduction as so many schemes are becoming fully funded and looking at end-game options such as buying out. It also aligns with the UK Government’s statement earlier in 2025 that it intends to legislate to make refunds of surpluses easier.
4. Separation of various disclosure requirements
The 2026 SORP introduces a clearer separation of some disclosure requirements and clarifies others:
The Summary of Contributions now needs to be included as a separate section of the Annual Report and not as part of the Trustees’ Report.
The Auditor’s Statement about Contributions must also be included either immediately before or immediately after the Summary of Contributions.
Specific disclosure is now required (within the financial statements) of the fact that they are prepared on the going concern basis, where this is the case, together with the need to confirm certain considerations about the future.
The SORP provides clarification of the disclosures required where the sponsoring employer recharges expenses.
The 2026 SORP gives more clarity around when a scheme might no longer be considered a going concern, which is helpful.
5. Other key changes
More clarity over the presentation of investment switches
A requirement to show separately the amount paid out of secured annuity policies for pension payments, where this is included within the investment reconciliation table, as opposed to within investment income.
Bid pricing is to continue as a fair value for investment assets.
Individual and bulk transfers out must be shown on the face of the Fund Account, rather than as previously, within a note.
Netting-off Fund Account items is prohibited, with clarification provided.
This final point will particularly impact Small Self-Administered Schemes (SSASs), which hold investment property and prepare financial statements compliant with the SORP. Where a single netted-off “income” figure was previously shown on the face of the Fund Account, rental income and letting costs will now need to be grossed up and presented separately on the face of the Fund Account. Scheme accountants will need to be prepared for this additional work, which will also require comparative years’ figures.
Trustees and preparers of pension scheme financial statements should give early consideration to the changes introduced, considering particularly how they are likely to impact your scheme going forward.
If you would like further information and support in this area, please contact Brendan on 0808 144 5575 or email help@armstrongwatson.co.uk.
