Major BoE Intervention To Help DB Pensions

Daniel54

Like others ( other than the daft Altior) I have been on a learning curve about this today

My understanding is briefly as follows:

DB pension funds need to carry long term gilts to match liabilities

They hedge volatility on these gilts by buying liability driven investment trades

The increase in long term gilts has been so extreme as to need margin calls on the hedging contracts, forcing the DB funds to sell assets and thereby reducing the value of the fund

More than happy if someone can explain in better detail, but here is a link to an FT article setting this out

https://www.ft.com/content/83927688-e0d1-4934-8d91-e279da6d6b6c

6am

I am curious how segregated these pension funds are? I am currently at the investment stage where I contribute to pension pot via salary sacrifice and not able to drawdown due to age. If one of these DB pension funds managed by the same company goes down how will it affect my investments? I am happy with the market risk, but I am not happy to lose my pension pot due to a failure of another pension fund managed by the same company. Is there anything I can do to reduce the risk of losing my pension pot? Should I split it somehow between different providers? Is it even possible to split?

Daniel54

6am said:

I am curious how segregated these pension funds are? I am currently at the investment stage where I contribute to pension pot via salary sacrifice and not able to drawdown due to age. If one of these DB pension funds managed by the same company goes down how will it affect my investments? I am happy with the market risk, but I am not happy to lose my pension pot due to a failure of another pension fund managed by the same company. Is there anything I can do to reduce the risk of losing my pension pot? Should I split it somehow between different providers? Is it even possible to split?

The DB pension funds are managed by the trustees, using third paryt fund managers

There is no reason why there should be a crossover between DB and DC pensions in this respect

Fermion

"JP Morgan Asset Management head of UK retail sales Mike Parsons has warned that IFA portfolio tools could leave clients overly exposed to UK gilts."

Quite glad I chose the DIY route

daz378

Could we have all lost a chunk of our pensions ? This is frightening  any grown ups left in the government,  to stabilize  the situation  or are we  all still at risk

MarkCarnage

daz378 said:

Could we have all lost a chunk of our pensions ? This is frightening  any grown ups left in the government,  to stabilize  the situation  or are we  all still at risk

For Defined Benefit, no, or highly unlikely.....as the scheme sponsor remains liable for any deficit, so unless they fail the benefit should be ok. 
For DC, there will have been falls in value of pension portfolios, particularly those holding significant amounts of UK Government Bonds, but in truth, almost all assets have fallen in value this year, it's just a question of degree. On the upside, annuity purchase rates have improved significantly and are likely to continue to do so. 
Some grown ups in Government would be nice, haven't been any for quite some time though as they tended to be removed for being too honest and sensible. 

Keep_pedalling

Fermion said:

"JP Morgan Asset Management head of UK retail sales Mike Parsons has warned that IFA portfolio tools could leave clients overly exposed to UK gilts."

Quite glad I chose the DIY route

He did say that, but he said it 12 years ago