The past fortnight has demonstrated how pension schemes can be significantly impacted by unexpected turmoil in financial markets. Many defined benefit (DB) schemes with hedged liabilities (including as part of a liability driven investment (LDI) strategy) have faced calls to post collateral in response to the rapid increase in gilt yields, giving rise to liquidity difficulties for some.
After dealing with the initial shock to investments and managing short-term liquidity needs, what can trustees do to ensure that they are well prepared to respond to any future disruption?
While many of the issues which have arisen are financial rather than legal, we suggest that trustees ask themselves the following questions:
Authored by the Pensions Team.
UK Pensions newsletter - October 2022
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