The Yorkshire and Clydesdale Bank Pension Scheme posted £335m in collateral amid volatility in the UK gilt market, more than five times the amount posted in the year prior, Virgin Money UK’s Financial Results have revealed.

The report noted that gilt yields rose “significantly” over the year to 30 September 2022, subsequently impacting the scheme's liability driven investment (LDI) portfolio, which were valued at £968m as at 30 September 2022.

As part of this, the scheme was required to post additional collateral, resulting in there being net £335m collateral posted by the scheme as at 30 September 2022, up from a net £65m collateral posted by the counterparties in the year prior.

However, the group clarified that the scheme is still estimated to have sufficient collateral headroom available to meet further rises in interest rates of more than 3 per cent.

In addition to this, it revealed that the scheme is holding over £1bn of further assets which could be liquidated within a week if needed to meet collateral calls.

Despite the increased collateral postings required, the report also revealed that the scheme's funding position for IAS 19 purposes has improved over the year, with a fair value of the assets of £3.2bn as at 30 September 2022.

The next triennial valuation for the scheme is due to complete by end of the 2023 financial year, with the trustee funding position at 30 September 2022, the effective date, showing a surplus, therefore indicating no further contributions will be required.

The accounts also confirmed that the group and the trustee to the scheme have entered into a contingent security arrangement, providing additional support to the scheme by underpinning recovery plan contributions and some additional investment risk.

The security is in the form of a pre-agreed maximum level of assets that are set aside for the benefit of the pension scheme in certain trigger events.

The last triennial valuation was completed during 2020, and revealed an improvement in the scheme's funding position, with a reported surplus of £144m, up from a deficit of £290m, and a technical provisions funding level of 103 per cent.

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