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ARTICLE · 10 MAY 2023

Pensions Regulator Guidance – Using Leveraged Liability-Driven Investment

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The Pensions Regulator has published guidance setting out practical steps for trustees of DB pension schemes to manage risks when using leveraged liability-driven investment (LDI).

United KingdomStrategy
Duncan Watson
Duncan Watson
Jay Doraisamy
Jay Doraisamy
Katherine Carter
Katherine Carter
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The Pensions Regulator has published guidance setting out practical steps for trustees of DB pension schemes to manage risks when using leveraged liability-driven investment (LDI). It covers the following areas:

  • Where leveraged LDI fits within the scheme's investment strategy.
  • Operating and maintaining a collateral buffer.
  • Testing the resilience of leveraged LDI arrangements to market volatility.
  • Ensuring that appropriate investment governance processes are in place.
  • Monitoring leveraged LDI arrangements.

The guidance replaces the Regulator's October and November 2022 statements on managing LDI-related risk and maintaining LDI resilience in light of the gilt market volatility in autumn 2022 (for more information on those statements, please see our October and December 2022 legal updates). The guidance follows the Bank of England's Financial Policy Committee's March 2023 recommendation that the Regulator should specify a minimum level of resilience

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