TPR expects there to have been about 3,000 LDI agreements in place by the end of 2021, with about 60% in pooled and the remainder in segregated arrangements. TPR estimated that about 85% of LDI agreements by assets are in segregated LDI, with about 15% in pooled arrangements.
The regulator also estimated that LDI funds covered about £1.4 trillion ($1.6 trillion) of liabilities at the end of 2021.
TPR also addressed the Bank of England's intervention on Sept. 28, when it stepped into markets as a backstop and said it would buy up to £5 billion in long-dated gilts per day until Oct. 14. This program has been extended and expanded, to also cover up to £5 billion in index-linked gilts per day.
Regarding the bank's plans to end its intervention on Friday, TPR said it continues to work with the BOE, other regulators and pension funds "to put in place mitigations for events that might happen after 14 October and to assess the impact on DB scheme liquidity, and to plan ahead."
The committee also asked TPR whether LDI was still fit for purpose. TPR said that, "in light of changing market conditions, funding levels and other factors, prudent pension funds will regularly review their LDI strategies, and the level of leverage within them. It is unclear whether the use of LDI will change as a result of the significant changes in funding levels as a result of bond yields and the associated asset allocation decisions that trustees may make as a result of that. We will be giving further consideration to this alongside other regulators."
TPR added that pension funds using LDI should have plans in place so that if interest rates rise and they need to post collateral, "they understand where that capital will come from."