Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of the impact of the sale of Government bonds by insurance companies who have taken over pension fund assets in exchange for annuities on (1) growth and (2) Government bond yields.

The volume of government gilt issuance is determined by the Office for Budget Responsibility forecast for cash borrowing, adjusted for redeeming gilts, any unanticipated under/over-financing in the previous financial year, and financing via other sources (such as National Savings & Investments).

Underlying demand for the UK’s debt remains robust, with a well-diversified investor base and the Debt Management Office’s gilt sales operations continue to see strong demand.

Insurance companies have fewer incentives to invest in gilts than Defined Benefit schemes, so insurance buyouts are expected to reduce demand from the sector over the longer term. This is well understood by the market. Gilts continue to offer benefits to insurance companies, though, and there are limits to the pace at which insurers can buy out pension funds.

Historically, we have seen changes in demand patterns from across the investor base. Overall demand has however remained resilient throughout these periods of changing investor patterns as a result of our policy of supporting a strong and diversified market. More generally, gilt yields are determined by a wide range of both domestic and international factors.