“There are many possible ‘solutions’, but the only one that will work involves ensuring that schemes cannot indulge in the practices that led us to this,” he said. He added that authorities should give funds six months to a year to unwind their current LDI contracts.

Keating said the Pensions Regulator itself should also be questioned over why it allowed the use of these hedging contracts. “I can only hope that they can also recognise the central role that the Pensions Regulator had in promoting those arrangements within our pension schemes.”

He said he was concerned that the regulator would advise against a ban on LDIs, in order to avoid tarnishing its reputation.

The fundamental disagreement is between those who see funded pensions as a risk to be managed and those who regard them as a “store of wealth”. Ironically, the current Government subscribes to the latter view , best expressed by the Sunak/Johnson letter to pension schemes demanding they invest in growth assets to build Britain back better. This demand was repeated by the current Chancellor when bringing forward the easing of the DC pension cap. But clearly he had no idea  that the consequences of his mini-budget would be the disinvestment of up to £200bn of pension assets, most of which could be described as “productive capital”.

An anonymous comment received by Pension PlayPen makes the terms of the disagreement clear

 The juxtaposition of a Government set on growth set against an unelected regulator advocating a directly opposing strategy of “de-risking”, will only entrench the problem.  Currently such a huge store of potential wealth targeting very low (and in many case negative) returns, it’s no wonder we are shackled with such low productivity, when aspirations were being set so low.

LDI has undoubtedly seen pension schemes through the years of low inflation and low interest rates. It has as Dawid comments “helped stabilise pension funding over the past two decades“.  But over that time the average allocation UK DB schemes made to “real assets”- rather than to credit sharply decreased

While the proportion of growth assets invested in the UK also plummeted

In short, the interests of our large DB pension schemes and those of Government looking to increase investment in UK Plc, have been at odds for as long as LDI has been in place and with the prospect of higher inflation and higher interest rates prevailing for the next few years, those schemes looking to remain open – either for future accrual or even to pay long-term liabilities – should be shackled by LDI.

Rather than pursue its relentless suppression of ambition , most recently articulated in the DWP’s funding regulations and in the drafts of the Pension Regulator’s DB funding code, perhaps the meetings between the Bank of England and the Regulators , reported in today’s Guardian, will mark a change in approach and a reversion to the more ambitious approach to pensions that prevailed before inflation was considered the great enemy.

Alternatively, we must look to the Bank of England to provide a long-stop for LDI, a proposition that hints at the nationalisation of our pension debt. That does not sound very Conservative