FCA reduces pensions deficit by £32.3m

The Financial Conduct Authority (FCA) has reduced its pension deficit by £32.3m, taking its total pension deficit to £87.1m, its annual report has revealed.

According to its report, published on Tuesday (11 July), the main driver for the funding improvement was a £29m pension contribution and a £7.1m net actuarial, offset by a £3.8m pension interest charge.

The overall funding position of the FCA group, which takes into account the regulator's operational costs of all its ongoing regulatory activities, improved by £25.8m, but still recorded a deficit of £61.5m as of 31 March 2019.

The scheme’s assets totaled £803m as at 31 March 2019, while its liabilities were measured at £886.7m for the years. It also recognised £3.4m in unfunded liabilities, taking the net liability to £87.1m.

Regarding the trustees’ investment strategy, the regulator said it is investing in “liability-driven investment and bonds whose values increases and decreases in interest rates”.

“This is done within a broad liability driven investing framework that uses cash, gilts and other hedging instruments like swaps in a capital efficient way. These funds help to manage the interest rate and inflation risks in the plan. In combination, this efficiently captures the trustee risk tolerances and return objectives relative to the plan’s liabilities,” it said.

Regarding policy developments, the regulator said that it that it plans to publish its final rules and guidance on its Retirement Outcomes Review, looking at how the market has change since the introduction of pension freedoms, before the end of the month.

It also noted other policy work including its research into adequate savings for retirement, published in May 2019, as well as a discussion paper on competition in non-workplace pensions which it expects to publish this summer.

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