Legal & General chairman slams Liz Truss over pensions meltdown

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Legal & General’s chairman slams Liz Truss for creating market chaos that led to pension collapse

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The chairman of Legal & General has criticized Liz Truss for creating market chaos that left several pension funds on the brink of collapse.

Sir John Kingman, a former Treasury mandarin, said no one expected the government to continue with policies that would create “such extraordinary instability”, referring to Kwasi Kwarteng’s mini budget in September.

L&G is one of the UK’s largest sellers of Liability Driven Investment (LDI) strategies.

Risk: L&G is one of the UK's largest marketers of so-called liability-based investment strategies

Risk: L&G is one of the UK’s largest marketers of so-called liability-based investment strategies

LDIs are used by final salary plans to ensure they can meet future payouts while hedging against inflation and interest rate movements.

They allow a pension fund to borrow money to increase exposure to government bonds or treasury bonds, freeing up more money to invest in riskier, higher-yield assets, such as stocks.

But as gold prices plummeted in the wake of Kwarteng’s mini-Budget, the banks that had lent to LDI funds demanded more collateral – meaning the funds were pushed into an asset sell-off to raise cash.

This left some on the verge of collapse, with the pension funds they had used taking heavy losses.

L&G chief executive Sir Nigel Wilson added that the speed of the market crash “surprised us all”.