Pensions Bulletin 2022/43

Our viewpoint

Parliament scrutinises LDI – what will emerge?

There are two Parliamentary investigations currently underway into the events surrounding the difficulties faced, following September’s mini-Budget, by some DB pension schemes that used leveraged LDI strategies.  These investigations may create pressure for regulatory reform to address any identified gaps in the “regulatory architecture” that were exposed by the dramatic shifts in gilt yields at the end of September and during October.

As we have previously reported (see Pensions Bulletin 2022/39), the House of Commons’ Work and Pensions Committee is carrying out a short inquiry focussing on the impact of the recent volatility in gilt yields on DB schemes with LDI strategies and their governance and regulation.  It held its first oral hearing on 23 November 2022 (including evidence from LCP).

The House of Lords’ Industry and Regulators Committee heard evidence from the CEOs of the Financial Conduct Authority and the Pensions Regulator and their senior specialists on 15 November 2022.  We look at some key exchanges below, along with our thoughts:

Stress testing / data collection / systemic risks. 

Back in 2018, the Bank of England, FCA and Pensions Regulator carried out some stress testing of LDI, modelling an increase in gilt yields of 1% over the course of a month, which was deemed to be a 1-in-a-1000 event.  In September, there was a change in yields of 1.5% in just one day – with further large moves on other days during the period to 14 October, when the Bank of England’s support ended.  The discussion included whether it was adequate to stress test only up to reasonably plausible events. 

A key matter to be addressed is that the regulators do not appear to have adequate data to be able to consider and regulate the systemic risks that arise from LDI.  It therefore seems that trustees can expect to be subject to more onerous data requirements – Charles Counsell, CEO of the Pensions Regulator, saying that “new data collection will be coming in during 2023, and we will look at whether we need to go further with data collection, so that we can work on the [sic] systematic risks together”.

Complexity of the regulatory architecture / joined up regulators.

The FCA regulates investment managers, and the conduct (but not solvency, that is the PRA/Bank of England) of bank counterparties.  The Pensions Regulator regulates DB pension schemes.  Some LDI funds are domiciled in Ireland and Luxembourg and are not subject to direct supervision by any UK regulator.  Investment consultants may be regulated by the FCA or by another party, for example by the Institute and Faculty of Actuaries. 

Whilst there was clearly growing cooperation between the agencies as we approached and went through the crisis, further work will be needed to ensure that nothing falls through the cracks in the future.  In this vein Charles Counsell said that “We are working alongside the FCA to consider whether we should make a statement to the LDI funds and to pension schemes that operate segregated arrangements about the level of collateral that we expect them to keep, which would mean that there would be a stronger buffer in the event of very sharp bond yield movements than there was before this event happened.  That is one change that we will make”.  It is worth noting that effectively this has already happened at the vast majority of LDI funds, as significant additional collateral was required following the events of late-September.

Regulation of investment consultants.

This is not new but Nikhil Rathi, CEO of the FCA, emphasised the FCA’s long-standing position that “investment consultants should be brought into the regulatory perimeter” but he recognises that this is a matter for government and Parliament.  We also note that investment consultants are already regulated, albeit not all by the FCA.


These proceedings are of great interest to anyone concerned with the dramatic events that took place in our industry recently.  It remains to be seen what regulatory reform will eventually emerge.  We have heard nothing from the Government yet, but it is to be hoped that any proposed changes will be considered carefully with adequate consultation given the risk of unintended consequences in this area.

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Autumn Statement largely silent on pensions matters but does confirm the triple lock

Fears that the Government would mount a raid, in one form or another, on pension savings at this year’s Autumn Statement proved to be misplaced.  In a speech on 17 November 2022 that delivered a Budget in all but name, Chancellor Jeremy Hunt made only two direct announcements about pensions:

  • The triple lock on the Basic State Pension and Single Tier State Pension will continue to be honoured and so both will increase by 10.1% next April (ie in line with price inflation). The precise figures were later set out by Mel Stride, Secretary of State for Work and Pensions in a written statement – and so these pensions will rise to £8,112.40 pa and £10,600.20 pa respectively
  • The guarantee credit element of the State Pension Credit will be increased by 10.1% (rather than by the lower earnings measure as required by the Pensions Act 2007)

The DWP has separately published a full list of the benefit and pension rates for 2023/24.

In a speech that also announced the extension of a number of freezes to tax allowances, there was no mention of a further freeze to the pensions Lifetime Allowance.  From an examination of the Autumn Statement paperwork, it appears that the current freeze remains due to end on 5 April 2026 – but there are many more budgets to come before then, with the next one due in Spring 2023.

The Chancellor’s decisions on income tax bands (for those other than in Scotland), whilst ensuring that many will pay more income tax, also opens up the opportunity for some to enjoy greater tax relief on contributions they make personally to pension schemes – most notably for those drawn into the 45% tax band for the first time by virtue of the starting point for this band falling from £150,000 to £125,140 pa from 6 April 2023.  Those with earnings between £100,000 and £125,140 will continue to benefit from up to 60% tax relief on their pension contributions, due to a technicality as the Personal Allowance is steadily withdrawn between these two points.

The continuation of the freeze on the inheritance tax threshold for two more years (which was set at £325,000 on 6 April 2009 and now runs until 5 April 2028) further encourages those who can afford to do so, to run down other assets in retirement before accessing IHT-free DC pension savings.

Some retirement trusts, mostly EFRBS, will see their capital gains tax thresholds substantially reduce as part of a wider part-elimination of these thresholds, with the trust threshold falling from £6,150 in 2022/23 to £3,000 in 2023/24 and to £1,500 in 2024/25 onwards.

Some of the measures announced in the Autumn statement will be taken forward in an Autumn Finance Bill which was published on 22 November 2022 and restricts itself to the key tax changes announced by the Chancellor, whilst others will be set out in next year’s Finance Bill that will follow the Spring Budget.


Whilst the Autumn Statement contained no measures that could directly impact savings into registered pension schemes to any material extent this is to ignore the wider setting of high inflation severely impacting the ability to save, plus an economic downturn and higher taxation.  Given these headwinds it is welcome that the Government has not been tempted to extract any more from retirement savings – well, at least, not right now.

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Updated dashboard standards released

The Pensions Dashboards Programme has released new versions of its standards following earlier consultation (see Pensions Bulletin 2022/28).  The areas covered by the entire suite are as follows:

  • Data – the data formatting requirements pension providers must follow when returning pensions data
  • Design – the requirements for presentation of the pensions data on dashboards and design of the dashboards, including messaging, signposting and onward customer journeys
  • Reporting – a description of the data that both pension providers and dashboard providers must supply to regulatory bodies, PDP and the DWP, to monitor the effectiveness and health of the ecosystem
  • Technical – what data and dashboard providers will use to interface with the central technical architecture and/or each other
  • Code of connection – combining the required security, service and operational standards, which ecosystem participants must adhere to

Other than the design standard, the PDP’s standards have all now been finalised and will come into force following ministerial approval.  A consultation on draft design standards will take place in the winter.

The PDP has also confirmed its process for future updates to standards.  This includes principles for decision-making and the notice period for industry.

The PDP will be hosting webinars on 5 and 7 December explaining the November 2022 versions of standards.  A webinar on design standards will also take place on 8 December.


Those at the coalface of IT projects to connect schemes to the dashboard ecosystem will need to closely examine these standards to ensure that the schemes they are working for will be able to successfully connect and interact with the ecosystem when their time comes.

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Pensions Regulator reflects on its trustee board equality, diversity and inclusion plans

In his latest blog, David Fairs, Executive Director of Regulatory Policy at the Pensions Regulator, provides an update on the Regulator’s plans to encourage greater equality, diversity and inclusion across the pensions industry.

Earlier this year the Regulator published its action plan for trusteeship (see Pensions Bulletin 2022/35).  Three deliverables were promised then and they are recited in the blog, although there is no news on any further developments in this respect – in particular the equality, diversity and inclusion guidance for trustees that is intended to be published by 31 March 2023.  Nevertheless, it does seem that when the long-delayed Single Code is published it will contain some “clear EDI expectations” of trustees.

The blog also provides some further news about the Regulator’s own EDI journey.


We look forward to seeing the Regulator’s guidance as the first solid deliverable in a project that has been ongoing since at least July 2019.

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