Pension trustees and auditors are facing a challenging year amid an expected record volume of pension risk transfer (PRT) transactions in 2024, RSM UK has said.

Both WTW and Hymans Robertson have predicted that 2024 will be a record-breaking year for PRT activity, driven by defined benefit (DB) pension scheme funding improvements and increased insurer capacity.

This will pose challenges to pension scheme trustees and auditors, as deals continue to become more innovative in nature and therefore more complicated, especially from an audit and accounting perspective, according to RSM UK audit director, Andrew Aston.

“The pension scheme funding improvements that occurred from late in 2022 are going to drive another further major uptick in pensions de-risking transactions this year, bringing welcome news from a member and risk perspective, as more insurers are attracted to the pensions market,” he commented.

“However, I anticipate that it’s going to be a challenging year for trustees and auditors.”

Aston warned that complexities in the PRT deal market typically resulted in considerable legal documentation, which can be difficult for auditors and accountants to interpret, especially as many of these transactions consist of clauses linked to moving cashflows post-deal.

As a result, Aston argued that auditing processes will need to develop and become more sophisticated, with trustees needing to be aware of these complexities from the beginning, and tackle bespoke disclosures at the start, rather than bringing in advisers at the end to review and input into accounts.

“In many cases, bringing in advisers post-deal to review transactional activity may not be feasible,” Aston stated.

“To mitigate these risks where possible, trustees need to take care in documentation and communication to accountants and auditors during the transaction, ensuring all advisers are well-informed and in the strongest position to ensure the reporting to members is complete and accurate.”

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