Webb hints at CPI bond rule-out

The Bank of England’s Debt Management Office (DMO) is consulting on whether to issue UK government bonds tied to the inflation measure, because it has become the default uprate mechanism for schemes.

Last week, PW revealed the Pension Protection Fund is lobbying hard for the creation of a liquid market in such bonds, claiming it would save them around £2bn (PW November 14 2011).

But the pensions minister told Saga director general Ros Altmann: “On the issue of longevity you can see why it would work for the pensions industry to have assets that match their liabilities – longevity bonds and so on. 

“I sense, and it’s probably not total speculation, the Treasury already feels like it has a lot of longevity risk already, whether it’s the health services, long-term care or pensions and so on, so there is an issue about whether it would want to take on yet more; clearly that would be a challenge. 

“On CPI bonds and so on, the DMO looks at these things, but this is not something we are directly involved with.”