How an innocuous pension product is threatening to blow up the financial system - and the British economy
The TelegraphThe City was wary. “LDI has historically withstood major financial crises including the global financial crisis and Covid-19.” The rise of LDIs was fuelled in part by the decline of so-called defined benefit pension schemes, where members receive a fixed “final salary” upon retirement. “The current crisis would never have happened if we hadn’t got rid of defined benefit pension schemes,” one senior financier says. “If they’d done that, the pension schemes might have been better funded but the companies would have been seriously weakened or could have failed completely.” Terry Smith, one of the UK’s best-known fund managers, disagrees. Kate Jones, chairman of the Pension Protection Fund says: “It's really been the speed of these moves that have put a lot of liquidity pressure on DB schemes.” Could pension trustees have seen this coming?
History of this topic
UK plans to create pension megafunds with aim of unlocking $100 billion for investment
The Independent
Sluggish pension funds must embrace ‘culture of risk taking’, says City minister
The Telegraph
Unleash our pension power, says RUTH SUNDERLAND
Daily Mail
Pension funds crisis forces £65bn bailout by Bank
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