BofE rules out extending market interventions; TPR shares liquidity risk guidance

The Pensions Regulator (TPR) has published guidance on managing investment and liquidity risks amid the current market conditions, while the Bank of England (BofE) has ruled out extending recent market interventions.

The BofE previously confirmed plans for temporary and targeted purchases in the gilt market in an effort to prevent a "self-reinforcing spiral", after gilt yields surged following the Chancellor's mini-Budget.

The BofE has since extended the scope of its daily gilt purchase operations to include purchases of index-linked gilts, with additional measures also announced to support this.

However, speaking at an Institute of International Finance in Washington DC, the BofE Governor, Andrew Bailey, confirmed that the Bank will not be extending the operations, urging pension schemes to take action ahead of the deadline.

"My message to the funds involved and all the firms involved managing those funds: You’ve got three days left now," he said. "You've got to get this done."

Industry experts have previously raised concerns that the BofE measures could end too soon, with the Pensions and Lifetime Savings Association (PLSA) suggesting that it should be extended to the next fiscal event on 31 October and possibly beyond.

In related news, TPR has published guidance for trustees and advisers of defined benefit (DB) and defined contribution (DC) schemes, outlining its expectations around managing investment and liquidity risks given current market conditions.

The regulator confirmed that it is monitoring the situation in the financial markets "closely" to assess the impact on pension schemes, and speaking to trustees and their advisers about how schemes are responding to current market volatility.

TPR stated: "We will continue to monitor the situation closely this week, and following 14 October, working closely with our regulatory partners in the BoE, the Financial Conduct Authority and the government.

"We will provide further updates to trustees if needed and as the situation develops".

Although the guidance acknowledged that decisions had to be made at very short notice, with the information available at the time, it encouraged trustees to engage with their investment advisers to gain an accurate position so they can focus and prioritise the key areas of concern.

In particular, the regulator recommended that DB trustees review their operational processes, review their liquidity position, their liability hedging position, and funding and risk position.

For DC schemes, meanwhile, the regulator encouraged trustees to maintain a long-term perspective when reviewing recent market volatility and performance, stressing that pensions are long-term saving vehicles, and it is important that savers do not make hasty decisions based on short-term volatility.

TPR also recommended that DC trustees review their investment strategy, and operational factors in executing this strategy, and to review processes to ensure they can act at speed where necessary.

In addition to this, the regulator encouraged DC trustees to communicate with savers who are approaching retirement to make them aware of their options and encourage savers to seek regulated financial advice or speak to MoneyHelper before making decisions.

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