Seventh Report - Defined benefit pensions with Liability Driven Investments
Select Committee
Work and Pensions Committee
HC 826
23 June 2023
Government response
First Special Report - Defined benefit pensions with Liability Driven Investments: Government Response to Committee’s Seventh Report of Session 2022–23 · published 20 Nov 2023
Recommendations & Conclusions
3 results
3
Conclusion
Deferred
UK transposition of IORP allowed leveraged LDI, introducing risks evident in September 2022.
Conclusion
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 …
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Government Response Summary
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
Para 99
Respond to the DB consolidation consultation and prioritise improving trustee regulation and governance standards.
Conclusion
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 …
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Government Response Summary
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
Para 127
Consult on introducing LDI disclosure requirements for pension schemes to improve governance.
Recommendation
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 …
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Government Response Summary
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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