Defined benefit pensions with Liability Driven Investments

Work and Pensions Committee Closed Inquiry
Opened: 24 Oct 2022 Closed: 6 Dec 2023 Parliament page
Increases in yields on long-dated gilts in late September and early October 2022 meant defined benefit (DB) schemes using Liability Driven Investment (LDI) strategies needed to deal with the rapid increase in collateral required to support the LDI trades. This led to the Bank of England’s announcement on 28 September … Read more
8 Recommendations
9 Conclusions
1 Report
5 Oral sessions
12 Letters
5 Events
Activity timeline 24 events
20 Nov
2023
Report published
12 Jul
2023
Correspondence
23 Jun
2023
Report published
3 May
2023
Correspondence
3 May
2023
Correspondence
19 Apr
2023
Correspondence
22 Mar
2023
Oral evidence
22 Mar
2023
Correspondence
22 Mar
2023
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
15 Mar
2023
Correspondence
1 Feb
2023
Oral evidence
1 Feb
2023
Formal meeting (oral evidence session) · Room 6, Palace of Westminster
Oral evidence sessions 5 sessions
22 Mar 2023
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Work and Pensions Committee
Andrew Griffith MP · HM Treasury Laura Trott · Department for Work and Pensions Lowri Khan · HM Treasury Tom Josephs · Department for Work and Pensions
1 Feb 2023
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Work and Pensions Committee
Professor David Blake · Pensions Institute, Bayes Business School Sarah Breeden · Bank of England Tim Bush · Pensions and Investment Research Consultants Toby Nangle
14 Dec 2022
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Work and Pensions Committee
Charles Counsell · The Pensions Regulator David Fairs · The Pensions Regulator Evan Guppy · Pension Protection Fund Nikhil Rathi · Financial Conduct Authority Oliver Morley · Money and Pensions Service Simon Walls · Financial Conduct Authority
7 Dec 2022
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Work and Pensions Committee
Abdallah Nauphal · Insight Investment Charles Prideaux · Schroders Investment Management Ltd David Fogarty · Dalriada Trustees Limited Dr Jonathan Lipkin · Investment Association Harus Rai · Capital Cranfield Kerrin Rosenberg · Cardano Investment Rod Goodyer · Barnett Waddingham LLP
23 Nov 2022
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Work and Pensions Committee
Dr Con Keating · Brighton Rock Group Iain Clacher · Leeds Business School Joe Dabrowski · Pension and Lifetime Savings Association John Ralfe · John Ralfe Consulting Jonathan Camfield · Lane, Clark & Peacock Leah Evans · Institute and Faculty of Actuaries Mr Henry Tapper · Agewage Mr Steven Taylor · Association of Consulting Actuaries
Title HC No. Published Items Response
Seventh Report - Defined benefit pensions with Liability Driven … HC 826 23 Jun 2023 17 Responded
Recommendations & Conclusions
3 results
Clear
4 Conclusion Acknowledged
Seventh Report - Defined benefit p…
Prevent DB pension scheme investments from jeopardising the UK economy in future.
Sharp rises in gilt yields which LDI funds lacked the resilience to manage, led to the Bank of England having to intervene in September 2022 to protect financial stability. DB pension scheme investments must not be allowed to jeopardise the … Read more
Government Response
The government acknowledges the concern by welcoming the Committee's separate recommendation to bring investment consultants under FCA regulation. It states it will consider this as part of a call for evidence and take various views into account for future steps.
Department for Work and Pensions
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7 Conclusion Acknowledged
Seventh Report - Defined benefit p…
Require TPR to mandate trustee data reporting on LDI and develop engagement strategy.
Leverage may have worked relatively well for pension schemes during a long period of low and volatile interest rates. However, it exposed them to additional liquidity risk and requirements, as collateral demands can change over short periods when interest rates … Read more
Government Response
The government highlights existing legal requirements for trustees to prepare investment principle statements. It states TPR has an existing program to collect data and DWP will consider future changes to disclosure requirements based on TPR's findings.
Department for Work and Pensions
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17 Recommendation Acknowledged
Seventh Report - Defined benefit p…
September 2022 demonstrated systemic risks from DB scheme investment strategies.
The September 2022 episode demonstrated the potential for the investment strategies used by DB schemes to give rise to systemic risks. While action has been taken to address some of the weaknesses which were exposed in this episode, there is … Read more
Government Response
The Government welcomes the Committee’s report and indicates progress to date and proposals for future work to address each recommendation.
Department for Work and Pensions
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Government Response AI assessment · 17 of 8 classified
Accepted 10
Accepted in Part 1
Acknowledged 3
Deferred 3
Total 8 recs + 9 conclusions
Correspondence 12 letters
12 Jul 2023 Correspondence with the Minister for Pensions relating to the Defined benefit pensions with Liability Driven Investments inquiry
Parliament page
3 May 2023 Correspondence from the Financial Conduct Authority relating to Liability Driven Investment guidance
Parliament page
3 May 2023 Correspondence with the Minister for Pensions and the Economic Secretary to the Treasury relating to Defined benefit pensions with Liability Driven Investments
Parliament page
19 Apr 2023 Correspondence with Minister for Pensions and Economic Secretary to the Treasury relating to the defined benefit pensions with Liability Driven investments inquiry
Parliament page
22 Mar 2023 To committee Letter from David Roberts, Chair of the Court of the Bank of England, relating to Defined benefit pensions with Liability Driven Investments
Parliament page
15 Mar 2023 Correspondence with the Bank of England relating to Defined benefit pensions with LDI (follow up to evidence session)
Parliament page
25 Jan 2023 Correspondence with the Financial Conduct Authority (defined benefit pensions and Liability Driven Investments)
Parliament page
25 Jan 2023 Correspondence with the Pensions Protection Fund (defined benefit pensions with Liability Driven Investments)
Parliament page
25 Jan 2023 Correspondence with the Pensions Regulator (defined benefit pensions with Liability Driven Investments)
Parliament page
12 Jan 2023 Correspondence with the Government's Actuary Department about the LDI inquiry
Parliament page
14 Dec 2022 Correspondence with The Pensions Regulator about the defined benefit pensions with liability driven investments inquiry
Parliament page
14 Dec 2022 Correspondence with the Minister for Pensions about the Committee's inquiry into Defined Benefit pensions with Liability Driven Investments
Parliament page