UK pension fund trustees should step up engagement with investment managers to quantify funding gaps and risks prior to the end of the Bank of England's (BoE) emergency bond-buying scheme on October 14, The Pensions Regulator said on Wednesday.
UK pension funds are racing to raise sufficient cash to meet hundreds of billions of pounds in collateral calls on underwater derivative positions before the deadline, prompting the watchdog to call for reviews of cash management and disposals plans and revise them if necessary.
The regulator has also encouraged schemes to consider appointing professional trustees and to discuss whether employers are able to provide cash to help plug any liquidity shortfall, it said in a guidance statement for pension fund trustees and advisers.
"As the BoE recently stated, insuring schemes against all extreme market outcomes might not be a reasonable expectation but it is important that lessons are learned from these recent events," the regulator said.
The oversight of the 1.6 trillion pound (R33 trillion) liability-driven investments (LDI) industry has come under scrutiny after a sharp rise in gilt yields nearly two weeks ago forced pension schemes to stump up cash to shore up their LDI positions - typically derivatives used to hedge gilts.
The BoE has had to step in to stabilise markets.
In a sign of the spillover of the stress to other asset classes, Columbia Threadneedle said late on Tuesday it had suspended a property fund aimed at retail investors.