Avoiding squeeze

The advent of market-consistent valuation has been blamed for a squeeze in the long-dated gilt market. But are these scarce assets necessary for managing pension scheme risks? Laurence Neville investigates

2005 was the year when the UK pension industry finally bit the risk management bullet. The impact of FRS17 accounting standards (mandatory from 2005 onwards), the Pension Protection Fund's risk-based levy and scheme-specific funding requirements from the UK's Pension Regulator have all played a role. For sponsors, the risk that deficits might grow bigger due to unmatched swings in interest rates or inflation was suddenly too much to bear.

Yet the derivatives-based de-risking strategies enacted by