Jurisdiction(s):
United Kingdom

LDI in UK DB Pension Schemes: 2022 Gilt Market Crisis, Regulatory Responses (BoE, TPR, FCA), Governance and Resilience Requirements, and Legal Issues on Derivatives and Repos

Published by a LexisNexis Pensions expert

Practice notes

Financial terms defined • Bond :

This is a form of debt security, meaning a document that establishes a borrowing obligation under debt. For the entity issuing it, a bond serves as an alternative to borrowing money by means of a loan facility. In pension schemes, bonds have typically represented the second-largest slice of assets by asset class, sitting behind shares over time. Types include corporate bonds, which are issued by companies, and gilts, which are issued by the government respectively.

Please note the following:

In essence, bonds carry both a capital value and an income value component. The capital value reflects the bond’s price at market value or on redemption (that is to say, repayment). The income element is the coupon, that is, the interest rate. Put another way, bond prices move inversely to interest rates: when rates rise, values fall; when rates drop, prices increase. This characteristic makes bonds a useful hedge against shifts in interest rates, one of the main factors in valuing a scheme’s liabilities.
Alongside fixed interest issues, index-linked bonds are also available. These are typically issued by the Government and, in such cases, the interest and capital repayments are linked to movements in...

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Web page updated on 21/05/2026

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