Work and Pensions Committee (WPC) chair, Stephen Timms, has written to Pensions Minister, Laura Trott, to seek further updates on the steps being taken following issues around liability-driven investment (LDI) in late 2022.

Trott previously appeared before the both the WPC and the Industry and Regulators Committee alongside Economic Secretary to the Treasury, Andrew Griffith, to provide updates following the LDI issues faced by defined benefit (DB) pension schemes in 2022.

The Bank of England’s (BofE) Financial Policy Committee (FPC) has since shared its recommendations for LDI funds, calling on The Pensions Regulator’s (TPR) to take action as soon as possible to mitigate financial stability risk.

Timms' letter, written to both Trott and Griffith, therefore sought updates on the government response to these recommendations, as well as some of the issues raised in the previous evidence hearing.

In particular, Timms queried whether the ministers would agree with the recommendation to extend TPR's remit to take into account financial stability considerations, noting that Trott had previously suggested that TPR’s powers in relation to the impacts of pension funds on the wider financial system should be looked at.

Timms also noted that while Griffith had suggested that the more TPR could be part of the “very tight working relationship” between the BofE, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the better, the FPC does not have powers of direction in relation to TPR, as it does for the FCA and PRA.

Given this, he queried whether TPR should be included in section 9H of the BofE Act 1998 to give the FPC those powers of direction.

A key recommendation from the FPC also included calls for TPR to specify the minimum levels of resilience for LDI funds and LDI mandates in which pension trustees may invest, recommending a minimum of around 250 basis points.

However, Timms pointed out that TPR previously told the committee that it does not have the information needed to assess whether such guidance is followed, and had suggested a ‘notifiable events regime’ could help, although legislation would be needed to make this mandatory.

In light of this, he queried what assessment had been made of whether a notifiable events regime is the right approach, and when the government would look to legislate for this if so.

In addition to this, Timms requested an update on whether the Pension Protection Fund (PPF) and TPR have the information needed to provide detailed information on the extent to which individual schemes ‘lost out’ as a result of the events of September 2022 and whether they plan to do so.

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