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
3 Conclusion Deferred
Seventh Report - Defined benefit p…
UK transposition of IORP allowed leveraged LDI, introducing risks evident in September 2022.
The European Directive on the Institute for Occupational Retirement Provision (IORP) contained restrictions on borrowing. In 2005, the UK Government took the decision to transpose it into law in a way that allowed existing investment practices, including the use of … Read more
Government Response
The government highlights past actions like publishing guidance and calls for evidence. It states TPR has no direct means to restrict LDI use as it's a trustee decision, though TPR will monitor adherence to guidance and take action on governance failures.
Department for Work and Pensions
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9 Conclusion Deferred
Seventh Report - Defined benefit p…
Respond to the DB consolidation consultation and prioritise improving trustee regulation and governance standards.
TPR told us that scheme consolidation would help improve scheme governance, by reducing the number of small schemes. However, consolidation needs to be into a safe vehicle, which requires legislation. DWP consulted on DB consolidation in 2018 but has still … Read more
Government Response
The government accepts the FPC's recommendation for TPR to incorporate financial stability considerations and details TPR's ongoing work, including setting up protocols with the BoE, reviewing its approach to external risks, and researching non-LDI trends. It does not address the specific deadlines or actions requested in the recommendation.
Department for Work and Pensions
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13 Recommendation Deferred
Seventh Report - Defined benefit p…
Consult on introducing LDI disclosure requirements for pension schemes to improve governance.
In addition to putting in place mechanisms to provide real-time warning of reductions in LDI resilience, the Department for Work and Pensions and The Pensions Regulator should consult on whether introducing disclosure requirements on pension schemes relating the use of … Read more
Government Response
The government states existing law requires statements of investment principles and TPR is already collecting data; DWP will consider whether changes to disclosure requirements are appropriate in light of TPR’s findings, deferring a direct commitment to consult on new requirements.
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