The Pensions Regulator has warned UK defined‑benefit schemes that shedding private‑market holdings could trigger exit costs exceeding 10 % of asset value. Trustees, urged to reassess liquidity after a late‑2023 letter, are being told by consultants to hold rather than sell illiquid positions. £277 billion of the £1.95 trillion in DB assets sits in private equity, property and other alternatives, exposing funds to steep discounts if markets turn sour.

Van Lanschot Kempen’s UK CIO Nikesh Patel described forced exits as a “negotiated surrender of value,” while Barnett Waddingham’s CIO Matt Tickle warned discounts could range from a few points to nearly 50 %. Recent data from WTW Investment Management show exit fees of 11 % on its Secure Income Fund and 3‑5 % on the Partners Fund, underscoring the high price of liquidity.

The regulator’s letter to 58 schemes follows tighter collateral rules that now require buffers to survive a 3‑percentage‑point rise in gilt yields, double the 2022 stress test. Although leverage has been curbed, the threat of a rapid gilt sell‑off—sparked by geopolitical tension—means illiquid holdings could still erode retiree payouts, forcing trustees to balance return chasing with cash‑flow safety.