Every so often, the relatively sedate world of defined benefit (DB) pensions is propelled up the political and media agenda, out of the trade publications and business sections, and onto the front pages of national newspapers.
The usual culprit for such a flurry of activity is a major corporate collapse that leads to thousands of pensioners seeing their benefits put at risk. But the past couple of weeks have seen a crisis of much greater magnitude explode into the public consciousness, with the liability-driven investment (LDI) crunch sending shockwaves across financial markets, and threatening to drag those responsible for overseeing DB schemes into the spotlight.
"Squeaky fund time," read the headline of the Sun, the morning after the Bank of England unveiled its emergency gilt-buying programme. It takes an event of some scale to prompt the tabloids to splash on a story about pensions; particularly one that centres upon an impenetrable investment strategy that few outside the sector have heard of, and fewer still understand.
But those three initials are now seared into the minds of MPs and journalists as the source of a brewing financial crisis. And, as a result, those working in the sector now need to brace themselves for a period of heightened scrutiny.
Parliamentary select committees have already begun to grind into gear, with Stephen Timms MP, the Labour chair of the Work and Pensions Committee, sending The Pensions Regulator a list of 12 questions about their oversight of LDI. Separately, the Treasury Select Committee has announced a formal inquiry entitled "the September 2022 Fiscal Event", with hearings beginning on 12 October.
Alongside this, there have been upwards of 150 articles on LDI in top tier news publications over the past two weeks.
The questions for trustees
As the ripple of initial inquiries to those in the sector grows into a wave, this scrutiny - and associated calls for accountability - will flow up the chain of responsibility, from the financial whizzes on the frontline who designed the LDI investment strategies, up through those who marketed them, and onto the trustees who decided to implement them, before ultimately alighting upon the regulators responsible for oversight of the system.
For trustees, the key questions are likely to centre on the extent to which they understood LDI and the risks that flow from it, what steps they took to mitigate those risks, and how certain they are that those risks have now been managed.
The first challenge they will face is in seeking to actually articulate in a comprehensible way to lay political and media audiences their understanding of what LDI is and how it benefits schemes.
While business journalists and some of the more financially-literate MPs are capable of grasping the concept in headline terms, conveying its inner workings has been described by one of the strategy's original architects as akin to trying to "explain some aspects of quantum physics to people who aren't really physicists".
They will also need to have a clear narrative about the serious risks to scheme funding levels posed by falling interest rates and the associated rationale that led to the adoption of LDI strategies, as well as being able to demonstrate how that fitted within the designs of the regulatory framework.
The temptation to cleave closely to a line that they were simply following the advice they were given by their investment experts must be avoided, as it is unlikely to pass muster with external critics. As the first line of defence of members' interests, trustees will instead need to be able to demonstrate how such advice was assessed and challenged, and how robust governance procedures were in place to ensure it was not blindly followed.
The underlying challenge for trustees - and indeed for all involved in the governance and oversight of DB schemes - is that the LDI crunch presents not just a scheme-specific risk but a systemic one.
And while previous pensions crises have led to those in the industry facing scrutiny for misfortunes that have befallen an individual set of members, those who come under the spotlight in the context of LDI risk becoming poster children for the failings of an entire sector.
Patrick Foster is a partner at Helm Partners, a communications consultancy with experience in helping trustees experiencing complex and challenging scenarios manage interest from the press and politicians.