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TPR said it expects trustees to engage with advisers to review their operational resilience, liquidity position, hedging level and more in light of the current economic situation.
The risk of gilt yields rising is well understood by trustees, advisers and LDI managers, TPR maintained, saying it was the unprecedented speed and magnitude at which gilt yields increased towards the end of September, as well as the ability of schemes and LDI funds to respond to this, that created liquidity pressures when LDI managers urgently sought further collateral.
"DB pension schemes were not at risk of 'collapse' due to the rapid movements in gilt yields, but the key challenge for schemes has been the ability to access liquidity at short notice to maintain their liability hedging positions in an environment when long-term interest rates rose rapidly in just a few days," it observed.
TPR has come under scrutiny during the liquidity crisis as pension funds had to rely on the Bank of England to break a vicious circle of lower gilt yields and high collateral calls. Chair of the Work and Pensions Committee Sir Stephen Timms wrote to the regulator's chief executive, Charles Counsell, last week, giving him until last Monday to respond. What should TPR have done/be doing to prevent a further crisis?
