Covenant Quarterly Q3 2023
A summary of the recent Mansion House speech
On 10 July, Chancellor of the Exchequer, Jeremy Hunt, delivered his first Mansion House speech. Following the recent market focus on pensions, it was unsurprising that Defined Benefit (DB) pension schemes featured at the heart of the speech.
Whilst it was acknowledged that reducing inflation remained the key near-term economic priority, the Chancellor looked further ahead and set out plans to increase returns for pensioners, improve outcomes for investors and unlock capital to support growth businesses. Changes to DB pension policy is one way the Chancellor is seeking to implement this broader economic strategy; it is therefore important that the proposals related to the pension industry are considered within the context of these broader economic aims.
Following the speech, the Chancellor confirmed that any future policy changes would follow three golden rules:
- Decisions would seek to ensure the best outcome for pension savers, with any changes to investment structures putting their needs first.
- The Government would prioritise a strong and diversified gilts market, recognising the key role that they play in the UK economy.
- Decisions taken would be intended to strengthen the UK’s competitive position as a leading financial centre able to fund public services
- DB sponsors facing the approaching debt maturities: The Bank of England raised the interest rate to 5.25%
- Ask the Analyst: The International Sustainability Standards Board (ISSB) Framework
- Regulatory developments: Funded Reinsurance and its implications on insurer buy-out.