LONDON — Britain’s pension scheme trustees should review their cash flow positions and assess if they can cope with further market stresses, following a sharp rise in gilt yields in recent days, The Pensions Regulator’s policy director said on Tuesday.
“We … expect trustees to review expected future cash flow requirements at a portfolio level and how they might be met in a range of conditions including an even more stressed market,” David Fairs, the regulator’s executive director of regulatory policy, analysis and advice, said in an emailed statement.
Pension schemes are facing emergency calls for collateral with as short a notice period as two days on derivatives positions used to hedge against the wild moves in UK government bonds, industry advisers say.
This may require them to set aside cash or sell more liquid assets to meet those collateral demands, the advisers add.
Trustees and their advisers should look at the resilience of their investments, risk management and funding arrangements “in more detail,” Fairs said.
He added the regulator expected trustees to “understand the source of those cash flows and how their availability might be affected by the ability to liquidate assets held and by the collateral requirements in a variety of markets, including one under greater stress.” (Reporting by Carolyn Cohn Editing by Louise Heavens and Mark Potter)