The deficit in the Financial Conduct Authority's (FCA) defined benefit (DB) scheme fell by £32.3m over the course of the year to 31 March this year, the watchdog has revealed.
In its annual report and accounts, published yesterday (9 July), the watchdog said the scheme had an accounting deficit of £83.7m and a funding level of 90.6%, up from 86.5%.
The plan's assets totalled £803m, compared to liabilities of £886.7m, while the FCA also had unfunded liabilities amounting to £3.4m.
These include a £1.3m past-service cost in respect of equalising GMPs between men and women, representing around 0.1% of liabilities.
The scheme also completed a buy-in with an unnamed insurer in February this year. It is the second bulk annuity to be purchased by the scheme, with the first buy-in completed in September 2016.
Around £123.5m of assets have now been transferred to insurers to pay for the policies, although the details of neither have been disclosed.
The scheme has marginally reduced its longevity expectations by 0.1 years for men aged 60 today, and men and women retiring aged 60 in 15 years, with the assumptions now sitting at 27 years, 28.1 years, and 30.9 years respectively.
The discount rate was also cut by 10 basis points (bps), but the scheme has increased its expectations for the Retail Prices Index and future pension increases by 15bps and 10bps respectively.
Exposure to equities has also been slashed by £35.3m, falling from 19.8% of the portfolio to 13.9%, with a reduction across all geographies. There has also been a 30bps increase in the allocation to debt securities.
Some of the change can be attributed to the purchase of the bulk annuity, with the scheme's buy-in policies representing 15.4% of assets, up from 8.8% in 2018.
In the annual report, the watchdog also reaffirmed its commitment to carry out a review of the effectiveness of independent governance committees (IGCs) over the course of this financial year, as had been pledged in its 2019/20 business plan, published in April.
The FCA also said it aims to publish its final rules and guidance arising from the Retirement Outcomes Review, including its suggestion of investment pathways, later this month, with the impact of the pathways also expected to come under review.
It comes amid the watchdog's concerns that "general increases in longevity, difficulty building up assets and continued low interest rates have left many unable to meet their expectations of sufficient retirement savings".
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Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Defined benefit (DB) schemes that provide GMPs must revisit and, where necessary, top-up historic cash equivalent transfer values (CETVs) that have been calculated on an unequal basis, a landmark court judgment said last week.
Regulators must act now to impose some "proper regulation" to stop another defined benefit (DB) transfer advice disaster, saysTim Sargisson.
Opportunities for defined benefit (DB) schemes to pursue investment approaches that help repair the UK’s economy cannot stand in the way of improving member outcomes, Aegon says.