MPs pressure Pension Regulator over support for hedging contracts
MPs are heaping pressure on the Pensions Regulator over its support for risky investment strategies that nearly pushed the industry to the brink last week.
The work and pensions committee has written to the watchdog amid concerns that it approved of, and may have even encouraged, the use of popular hedging contracts that magnified the market turmoil triggered by the government’s mini-budget, and resulted in a £65bn emergency support package by the Bank of England.
The committee’s chair, Sir Stephen Timms, asked the regulator whether it had done enough to monitor the risks posed to pension funds, given it appeared to play down reports that the schemes were coming under pressure back in August.
He also asked whether the watchdog should have taken “stronger action” before the central bank was forced to step in to avert a pensions crisis last Wednesday.
“Many people – including members of defined benefit pension schemes and sponsoring employers – will have been extremely concerned to read about the impact on pension funds of the fall in the price of long-dated government bonds last week,” Timmssaid in the letter addressed to the Pensions Regulator’s chief executive, Charles Counsell.
He said that while the Bank’s intervention “appeared to ease the pressure on schemes, there remains concern at what might happen when this intervention ends on 14 October”.
The intervention came after a plunge in the pound and a collapse in UK bond prices last week forced pensions funds into a firesale of assets in order to meet collateral calls on hedging contracts, known as liability-driven investments or LDIs.
Monetary policy
The job of the Bank of England, which since 1997 has had the statutory task of hitting the inflation target set by the
Read more on theguardian.com
