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Welcome to the October SPP News, following an extraordinary month for the UK and for the
pensions industry. There will be much reflection ahead on the gilt market issues that followed
the ‘mini-budget’. For now, I wanted to share a briefing that our Investment Committee has
recently given to the industry press:
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LDI strategies have been a successful tool in managing funding volatility risks within DB pension
schemes for the last 10-15 years. The increased funding stability experienced by schemes
pursuing LDI strategies over this period has meant that they have been able to close deficits and
reduce equity market risk, which in turn means that they have entered this period of turmoil
with strong balance sheets. There were always market-related and operational risks associated
with these strategies, and the majority of DB pension schemes were well-provisioned for a range
of historically unlikely events.
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Recent weeks have seen the realisation of these risks at a speed and magnitude which was
genuinely unprecedented. The ability of the industry to rapidly respond to the circumstances,
which in many cases has seen deficits reduce, should be seen as a positive. Pension schemes and
their advisers have needed to move at speed to take the appropriate course of action when faced
with a high volume of capital calls. There have been challenges in raising liquidity quickly to meet
these calls. In some cases, schemes have needed to work with sponsors to arrange loan facilities.Â
LDI fund managers have also been re-capitalising to lower levels of leverage and liquidity risk
within their funds. Â
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Given the pace of actions, the Bank of England support helped stabilise the situation, by helping to
buy time for schemes to raise sufficient liquidity and for LDI managers to reduce leverage within
their product ranges. There’s work to do now to assess the right strategy and approach going
forwards, but most schemes do this from a strong position, with reduced exposure to future
potential liquidity events due to the re-capitalisation that has already happened in the LDI space.
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I hope that your month ahead is a good deal calmer than the month you have just been through.
Our thanks for your continued support.
Fred Emden
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Cost of Living & Inflation – The Impact on Members and Benefits: VIEW HERE
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In our latest session, 'Cost of Living and Inflation - The Impact on Members and Benefits, (04:33) we first explored the legal implications of inflation on DB members’ options (e.g., transfers, commutation, GMP conversion) and (15:42) discretionary increases, including the cash and funding impacts of inflation when considering these, with reference to the trustees and sponsors. During the second half (29:20), from a DC perspective, we considered the questions that high inflation raises for an individual when actively saving, the decisions being taken at and during retirement, and how we might support individuals with these decisions.
Our previous correspondence with the CMA regarding the potential impact on pension trustees of The Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 202 has now moved forward.
SPP response to the consultation on the draft occupational pension schemes (Funding and Investment Strategy and Amendment) Regulations 2023.
The view that the draft regulations are unnecessarily restrictive, expressed in our response to the draft occupational pension schemes (Funding and Investment Strategy and Amendment) Regulations 2023 was featured in the Financial Times, Professional Pensions, Pensions Age and the Daily Telegraph (paywall).
Natalie Winterfrost, Chair of SPP’s Investment Committee, was quoted on recent market events in the Financial Times (paywall).
Charles Counsell at SPP Conference was featured in Pensions Expert and the session on movement of DB funds to annuities in IPE.
Whether buyout is still the holy grail was discussed by Atul del Tasso-Dhupelia, PwC, in the View from SPP in Pensions Age (P.26).
Jane Evans
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Jane joined the SPP in 2020 and in November begins her two-year term as Chair of the Covenant Committee.
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Jane is a longstanding covenant adviser and Partner in EY’s covenant practice, with a background in understanding corporate performance and prospects. She has a particular interest in the implications of climate change and other E, S and G risks on a company’s prospects and has been involved in thought leadership of this for the SPP and with the Pensions Regulator as it considers the implications of this area for covenant and long term funding.
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Her role encompasses advising trustees and companies both in day-to-day covenant developments, and in relation to events impacting the covenant, such as transactions or distress of the sponsor. She has been involved in some of the most interesting and complex covenant-led situations in the market over the last ten years.Â
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Jane is proud to be a founding ally member of the LGBTQ+ pensions network, O:pen, and is an active ally and mentor within and outside her firm.
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Jane is a keen amateur musician who plays the oboe and cor anglais in regular concerts across London. She is married to an eminent scientist and together they share a 9-year-old daughter and 2-year-old Labrador.
Liam Goulding
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Liam is the Chair of the Early Careers Professionals’ Group of the SPP which was created to support the SPP in best serving the professional needs of the membership cohort of individuals who have six or fewer years working in the pensions industry.
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Liam is a Senior Associate at the law firm Sackers and advises trustees and employers on a broad range of pensions issues in connection with both DB and DC arrangements. Liam is often involved in risk transfer work and has helped a number of schemes through their end-game planning to eventual wind-up. He also regularly advises on the pensions-related aspects of corporate transactions and the Pensions Regulator’s moral hazard regime.
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Outside of work, Liam enjoys going to the gym and has recently become a cat convert and is obsessed with his Russian Blue.
