Source · Select Committees · Work and Pensions Committee
Seventh Report - Defined benefit pensions with Liability Driven Investments
Work and Pensions Committee
HC 826
Published 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
4
Conclusion
Acknowledged
Para 54
Prevent DB pension scheme investments from jeopardising the UK economy in future.
Conclusion
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 …
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Government Response Summary
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
Require TPR to mandate trustee data reporting on LDI and develop engagement strategy.
Conclusion
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 …
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Government Response Summary
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
September 2022 demonstrated systemic risks from DB scheme investment strategies.
Recommendation
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 …
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Government Response Summary
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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