Interesting yes. He doesn't really account for what happened between 2010-2020 which is rather a long time.
And LDI isn't really the scandal. Nor did it really take off until post 2015 as far as I recall, everybody knew about it, and I have never heard of any big concerns other than the need to have an appropriate 'waterfall' of collateral.
Pension schemes have always used gilts to match their liabilities. But the returns on gilts were poor. Schemes with deficits need some income from investments. They can invest in return-seeking assets but this leaves them open to large fluctuations in the accounting deficit which is the basis for companies having to make large repair payments into their schemes.
LDI enables schemes to have more gilts exposure while also exploiting higher returns from say equities and loan funds. They do this by borrowing money to buy more gilts. The scheme takes the ups and downs on the gilts' value which hedges its risk, and the lender holds the actual gilts as security.
If the gilts fall in value, the scheme has to provide more security aka collateral, so the schemes hold some very liquid, stable investments which can be sold immediately to provide this collateral.
There is always a fall back for the schemes which is to reduce the hedging and sell down the gilts. The problem now is selling into a falling market.
What has been exposed here is that 3 x leverage is probably too much. I suspect this will typically not exceed 2 x in the future which means scheme returns could suffer. And of course it might make LDI less popular.
I suppose the lesson is that there is always extra risk with higher reward.
The fall in yields has simply been bigger and faster than anyone anticipated. This must be dealt with because there is a big risk in bank jargon of "financial instability" (think Zimbabwe).
The pension funds are IMO not the trigger, but the selling of gilts must have made the situation worse. When the Bank yesterday said the support would finish on Friday, schemes will undoubtedly have done some more selling (not just of gilts) to ensure they still have a collateral buffer.
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