I assume the value of long dated gilts falls as interest rates rise.
The capacity of a pension fund to meet its future obligations depends on income and capital. Whist income is unaffected by interest rate changes, the value of the holding will decline.
I assume that when the actuaries review pension fund projections - assets, income, anticipated growth rates, pension obligations etc - they suddenly look underfunded unless income projections are increased to compensate.
This would be a risky strategy - particularly for remaining final salary schemes - their obligations stretch out several decades, and interest rates and inflation must be critical to fund valuation.
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