A technical paper here on the UKEB website suggests more trouble brewing around discount rates.
As usual it’s hard to tell, given the impenetrable language used by accountants, but I suspect the problem is the so-called Contractual Service Margin (CSM). This is a mechanism that weirdly takes away the effect of excess discount rates like Matching Adjustment (or rather, the statutory equivalent of Matching Adjustment), forcing a firm to release day one MA gains over time. How this practice differs from just discounting by riskfree is a mystery to me.
The paper says “Profit recognition will be significantly slower than under current practice, mainly due to the absence of gains on initial recognition (sometimes referred to as ‘day 1 gains’),” then continues, ominously:
Data on the likely transitional impact from this change across the industry is not available to us, but the expectation is for material reductions in equity. The scale of the impact will depend in part on the transition approach adopted …
Unfortunately the rest of the paragraph makes almost no sense.