Royal Mail pension scheme made emergency cash call amid market turmoil

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https://www.telegraph.co.uk/business/20 ... id-market/


Royal Mail rushed forward the monthly payment into its pension scheme to help prevent a cash crunch, The Telegraph can reveal, after the mini-Budget sent crucial money markets into a tailspin.

The company responded to a request from the trustees of the Royal Mail Pension Plan to provide emergency liquidity, amid fears across the City that a run on pension funds driven by products known as Liability-Driven Investments (LDIs) would leave major funds insolvent. The Royal Mail scheme has 124,000 members and liabilities of £11bn.

The crisis was driven by a sell-off of government debt triggered by Kwasi Kwarteng’s tax cuts, which surprised markets in its direction and scale.

Royal Mail’s move to make a payment into its scheme early is the latest sign of the degree of concern within major schemes at the run on LDIs and subsequent demands for cash.

LDIs are used by pension funds to shield themselves against moves in inflation and help match their liabilities with their assets. The falling value of gilts after the mini-Budget meant funds faced demands for more collateral and began cashing in their positions in government debt.

It created a vicious cycle that prompted the Bank of England to step into the gilts market with up to £65bn of liquidity...