The Government Actuary’s Department (GAD) has assisted the Work and Pensions Select Committee with its inquiry into defined benefit pensions with Liability Driven Investments (LDI).

The Government Actuary, Martin Clarke, was pleased to share his perspectives on the LDI issue in response to the Committee’s questions.

Pensions and investment

GAD’s knowledge and involvement with LDI is unique as we work with schemes that use leveraged LDI. We also work with government departments that support the pensions and investment industry.

Discussions on the LDI issue have taken place in trustee meetings and in public forums. This improves the understanding of LDI for all stakeholders in what has also been a valuable lesson in governance.

Governance Concept Ball in Hand

The role of a trustee is challenging. Providing security to a promised pension requires trustees to make decisions around complex areas of investment, funding, administration and accounting.

LDI is an example of such a decision, an instrument that is intended to mitigate a funding risk but then introduces operational risks. Trustees need to assess these risks to understand the trade-off. That assessment will now be more informed, even if still challenging to achieve a balance that works for all stakeholders.

Such challenges are evident across pensions from trustees to advisers to those that legislate, as a balance is sought to provide an effective and proportionate solution.

GAD’s expertise

Investment consultant at GAD Christophor Ward, said: “GAD has experience of both working with schemes and considering how legislation and guidance is formulated. This is borne out of our expert analysis and helping our clients to ask the right questions.

“We look forward to continuing those discussions on improving the security of the UK defined benefit pension landscape.”

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