The government has announced plans to amend primary legislation to separate pension fund accounts from administering authority main accounts, as part of its efforts to "fix the broken local audit system".

The government consulted on its plans to overhaul the local audit system in December 2024, outlining measures, including a new single body, the Local Audit Office, designed to "radically simplify and streamline the currently fragmented system".

In the government response, Minister of State for Local Government and English Devolution, Jim McMahon, argued that the new government had "inherited a broken local audit system", emphasising that "reform has never been more urgent".

He also confirmed that the government will be moving forward with a number of proposals, after it found a "clear consensus" on the need for urgent action to fix the broken local audit system.

Pensions is one area that changes will be made, as the government response revealed that most respondents identified burdensome areas in accounts, with pension accounting and disclosures in particular seen as "complex and costly", with calls for simplification.

A number of respondents also made calls to remove overly complex accounting requirements, such as pension revaluations, to free up finance team capacity, when asked what additional support could be provided to strengthen financial governance.

In addition to this, some respondents called on the government to separate pension fund accounts to reduce delays and improve audit efficiency.

In particular, respondents suggested that the government decouple pension fund audits from main local authority audits, allowing pension-specialist responsible individuals to sign off Local Government Pension Scheme (LGPS) accounts.

There was also support for continuing Chartered Institute of Public Finance and Accountancy's (CIPFA) work on simplifying accounting for property, plant, equipment and pension liabilities.

In light of this feedback, the government confirmed that it will legislate to ensure there is no barrier to pension fund accounts being produced, audited and signed off separately from a main authority’s main accounts.

In addition to this, it committed to amending primary legislation to separate pension fund accounts from administering authority main accounts.

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