Pensions Minister, Laura Trott, has said that the Department for Work and Pensions (DWP) is looking to take recommendations following the autumn gilt market volatility into account before publishing the new defined benefit (DB) funding regulations.

Addressing both the Work and Pensions Committee and the Industry and Regulators Committee, Trott said that the department is looking to consider the recommendations from both committees and will look to share the regulations on DB scheme funding “shortly after that”.

Trott therefore stated that the timing of the new regulations will "depend slightly" on when the committee is able to publish its report.

Addressing industry concerns that the new code could lead to DB scheme closures, increase systemic risk and potentially prove contrary to the government’s growth agenda, Trott emphasised that “obviously that would not be the intent of the regulations”.

"What we're going to be trying to do with this is recognise that DB schemes are in a different place, they're reaching maturity and we need to reflect that in terms of the guidelines," she clarified.

"But I think it's very important that we do look at this in light of what happened last year that we make sure that we are talking to you, talking to the Lords Committee, understanding your recommendations in this area and that we incorporate that into the regulations."

Commenting on the issues around liability-driven investment (LDI) more broadly, Trott suggested that whilst the volatility showed that there are a “number of deficiencies” in the way LDI funds were managed and governed, they have played a “useful role over the past couple of decades”.

She stated: "In terms of the overall the funding of DB schemes, that I believe was 83 per cent in 2012, it's more like 130 per cent at the moment, which obviously is of significant performance.

"What LDI allowed schemes to do in that period, a time of falling interest rates, which are difficult for DB schemes, was allowed scheme performance to improve.

"Now, that's not to say that we've not learned a huge number of lessons. We’ve had report from the Lords, which rightly identified a number of issues with LDI and the governance of LDI, which we absolutely agree with, but it still remains the case that LDI has a useful place I believe in the overall investment options available to pension schemes.

“The events of last year have shown that there are a number of deficiencies in the way [LDI funds] were managed and governed, particularly around the collateral that they were asked to hold, around data, around overall resilience in the financial system and I think those are things where we absolutely need to make some changes going forward, but LDI has played a useful role in over the past couple of decades.”

Economic Secretary to the Treasury, Andrew Griffith, echoed this, arguing that it’s about “balance”, explaining that there is a “trade-off between making people’s pension assets work well to deliver performance, to reduce burdens on the state and deliver people prosperous time in their longevity, and the risk in the financial system".

“It would be foolish to say there aren't lessons to be learned," he continued, "and a lot of those would be about data disclosure, governance and making sure that trustees and those responsible are fully apprised of the risks that they take with whatever instrument it is they use.”

Griffith was also asked about the potential regulation of investment consultants, confirming that whilst “that is the direction of travel”, there has not been reports of deficiencies in investment advice.

He stated: “It’s certainly something we remain committed to do, but I would be interested to hear as we go through this exercise as to was it particularly deficiencies in the investment advisors, as that is not what I've heard so far.

"I've heard about issues about governance, about transparency, about reporting, about the speed of response in a situation that was somewhat exceptional.

"No one's actually brought forward examples where they say the investment advisors, who are all members of Institutes of Actuaries and regulated at the professional level, were not giving diligent and professional advice.

"I'm open minded to that, but to answer your question very clearly, we are committed to bringing investment advisors within the regulatory period."

However, Griffith was not able to provide a timeline for this, noting that "there is a lot of work for the Financial Conduct Authority (FCA) at the moment".

More broadly, Trott confirmed that the DWP currently has no plans to make the use of leveraged LDI conditional on, for instance, trustees meeting certain standards or reporting requirements.

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