Source · Select Committees · Work and Pensions Committee
Recommendation 2
2
Accepted
Paragraph: 41
TPR's approach to regulating scheme funding served as a motivation for LDI strategies.
Conclusion
A second motivation for LDI has been The Pensions Regulator’s approach to regulating scheme funding in line with its statutory objectives to protect member benefits and the Pension Protection Fund. We will return to the question of what is needed for open DB schemes to thrive in our inquiry on DB schemes.
Government Response Summary
The Pensions Regulator (TPR) will monitor LDI adherence, buffer levels, and operational procedures by collecting data from LDI managers, introducing new scheme return questions, and surveying investment consultants and schemes.
Paragraph Reference:
41
Government Response
Accepted
HM Government
Accepted
TPR will be using a range of sources to monitor adherence to their guidance on Using Leveraged Liability Driven Investment.1 Levels of buffer in operation will be monitored by TPR in collaboration with the Bank of England and FCA, as recommended by the Financial Policy Committee (FPC) Summary and Record of their 23 March 2023 meeting.2 This data will be collected from LDI managers on a regular basis and covers pooled and segregated funds representing approximately 90% of the market. TPR will be introducing new questions to the scheme return which trustees of DB schemes are required to make to them annually. This will improve TPR’s oversight of asset liquidity outside LDI mandates, so TPR can have confidence that buffers can be replenished in a timely fashion in the event of severe market movements. TPR will also be surveying investment consultants and schemes to check that governance and operational procedures are being implemented in line with TPR’s guidance. Market feedback suggests significantly improved processes have been put in place, but such survey information will help TPR detect and follow up poor practice with individual schemes and their advisers. Governance of LDI risks