Work and Pensions Committee to examine defined benefit pension schemes and LDIs

The Work and Pensions Committee has launched an inquiry into the regulation and governance of defined benefit pension schemes with liability driven investments (LDIs).

The inquiry will examine the impact of the recent volatility in gilt yields and intervention by the Bank of England. It will also consider the role of the Pensions Regulator in regulating the use of LDIs and whether schemes have adequate governance arrangements in place.

Rt Hon Sir Stephen Timms MP, Chair of the Work and Pensions Committee, said: “Recent economic volatility and the intervention of the Bank of England has highlighted the risks of defined benefit schemes using liability driven investments. Our inquiry will examine whether there are sufficient safeguards in place to protect the value of pension funds. It will also look at the role of trustees and the regulator in ensuring proper governance arrangements and whether LDIs are still fit for purpose for use by defined benefit schemes.”

Terms of Reference

The Committee would like to hear views on the following questions.

The deadline for submissions is Tuesday 15^th November.

• The impact on DB schemes of the rise in gilt yields in late September and early October.

• The impact on pension savers, whether in DB or defined contribution pension arrangements.

• Given its responsibility for regulating workplace pensions, whether the Pensions Regulator has taken the right approach to regulating the use of LDI and had the right monitoring arrangements.

• Whether DB schemes had adequate governance arrangements in place. For example, did trustees sufficiently understand the risks involved?

• Whether LDI is still essentially ‘fit for purpose’ for use by DB schemes. Are changes needed?

• Does the experience suggest other policy or governance changes needed, for example to DB funding rules?