(Bloomberg) -- UK lawmakers have urged the government and regulators to change pension fund rules after liability-driven investing nearly collapsed Britain’s gilt market last year.

There should be scrutiny of the use of leverage through derivatives and repo structures in the LDI market, while consultants to pension funds should be regulated “as a matter of urgency,” according to a House of Lords committee.

Former prime minster Liz Truss’s announcement of unfunded tax cuts in September caused chaos in the gilt market. Pension funds caught in the mayhem were forced to offload billions in liquid assets to meet margin calls. The Bank of England had to step in to prevent a full-blown meltdown.

Firms including BlackRock Inc., Legal & General Group Plc and Schroders Plc manage LDI funds on behalf of pension clients. The pension firms use them to match their liabilities with their assets, often using derivatives.

In a letter published Tuesday to Economic Secretary to the Treasury Andrew Griffith and Laura Trott, minister for pensions, the Industry and Regulators Committee said regulators did not focus sufficiently on the risks of LDI strategies.

“We are calling for regulators to introduce greater control and oversight of the use of borrowing in LDI strategies and for the government to assess whether the UK’s accounting standards are appropriate for the long-term investment strategies that are expected of pension schemes,” said Lord Hollick, who chairs the committee.

It comes after a series of parliamentary hearings, during which lawmakers interviewed key participants of the LDI drama, including outgoing chief executive of Legal & General Nigel Wilson and the head of pensions’ regulator Charles Counsell, who is also stepping down in March.

The committee said that some pension scheme trustees were not aware of the potential implications of their LDI strategies and were dependent on advice from investment consultants, who are currently unregulated.

It also said that The Pensions Regulator should be given a statutory duty or ministerial direction to consider the impact of the pensions sector on the wider financial system. 

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