A second senior figure is quitting the Pensions Regulator in the wake of the gilts market implosion last year and the ensuing post-mortem into liability-driven investment.
David Fairs, executive director of regulatory policy, analysis and advice, said he was leaving “to pursue new challenges”.
His departure date in March will coincide with the exit of Charles Counsell, the regulator’s chief executive, and comes two weeks after the the regulator named Nausicaa Delfas, currently a Financial Conduct Authority official, as Counsell’s successor.
The regulator has come under pressure over its unpreparedness for the liability-driven investing (LDI) shock last September. Traditional pension funds with such arrangements in place had to scramble to raise cash to meet margin calls on LDI-linked derivatives as gilt prices fell in the wake of the badly received mini-budget. That pushed down prices further in what threatened to be a self-feeding spiral.
Eventually the Bank of England was forced to intervene with a £65 billion gilt-buying package on the grounds of financial stability.
Advertisement
MPs on the Treasury select committee have accused the regulator of “not being on the ball” about the level of liquidity cushions it expected pension funds to hold to guard against the problem. It was also criticised for having very little information on pension fund LDI exposure. The body denied excessively pressuring pension funds to put LDI arrangements in place.
Fairs, a former KPMG senior pensions partner, joined the regulator in 2018 and has been a major figure in shaping its approach to pension fund regulation.
“A new year is a time for change, and is the right time for me to pursue new challenges,” said Fairs, 60.
Counsell, who announced that he was leaving last June, said: “David has been a highly valued member of our executive team for more than four years, during which time he has shown exceptional leadership internally and amongst our key stakeholders.”
LDI is a widespread hedging technique that in theory enables pension funds to exactly match their assets to their liabilities regardless of movements in markets and inflation.
Advertisement
The Bank, the FCA and the Pensions Regulator are all looking at the lessons from the affair, with new guidelines expected to force pension funds to keep larger liquidity cushions to cope with extreme changes in gilt yields, which move inversely to values.
Regulators are also looking at whether pension consultants, who have been vocal cheerleaders for LDI over the past 20 years, should be regulated for the first time.
Pension schemes had about £1 trillion in LDI exposure when the crisis hit — equivalent to 45 per cent of UK GDP.
