Parliament set to scrutinise pension funds’ controversial LDI strategies
The debt-fuelled investment strategies at the heart of a crisis in the pensions sector are set to be scrutinised by parliament in order to glean “lessons to be learned”, the Work and Pensions Committee announced today.
Political figures have been calling for an inquiry after pension funds deploying so-called liability-driven investment strategies faced a liquidity crisis sparked by Liz Truss’s disastrous mini-budget.
The Bank of England was forced to step in with an emergency bond-buying programme of long-dated gilts to steady the crisis.
In a statement today, MPs said they would now conduct an inquiry into the episode focusing on the recent volatility in “gilt yields on DB schemes with LDI strategies and their regulation and governance.”
“The Committee is keen to receive written evidence from those with expertise, experience or an interest in DB pensions with LDI strategies,”it wrote.
The inquiry is set to examine whether the Pensions Regulator had clamped down properly on LDI and whether it currently had “the right monitoring arrangements”, as well as whether DB schemes had “adequate governance arrangements in place”.
The consultation deadline is Tuesday 15th November 2022. Defined benefit schemes are also set to come under the microscope more widely this year as MPs launch a further inquiry into their management.