[Aunche]

So if this interpretation is correct, what should the fund directors have done instead? If you can only get 2% safely, but you need 6% or else the pension becomes insolvent, you're going to have to take some risks. UK stocks have been stagnant overall and plummeted during the pandemic, so that's not a much better option.

[jsmith99]

UK defined benefit pension fund trustees have been quite risk averse actually. The main purpose of these investments was to avoid a mismatch between the funds assets and its liabilities (which can fluctuate wildly as actuaries make small changes to their assumptions). Their actual investment strategy is often very risk averse though, heavy on bonds and on buying insurance.

Any deficit has to be covered by the original employers but trustees don't seem to have taken the temptation to chase returns. A recent report from the regulator showed most funds with deficits has less than 40% of funds in what they called 'return seeking assets' (ie things like shares as opposed to boring (usually!) things like public sector bonds).

[Scoundreller]

Usually pension fund solvency calculations are based on returns being related to the long bond interest rate, so as the long term bond rate goes up, your liabilities decrease.

[Aunche]

Your liabilities only decrease in the interest exceeds the payouts, but I doubt that's happening even as they're raising interest rates. What are they supposed to do in the meantime? Pray for the central bank to raise interest rates while your liabilities accrue?