The government has reached an agreement with UK pension funds as part of efforts to unlock up to £20 billion extra in funding for infrastructure projects.
The National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF) have signed a memorandum of understanding with the government to assist in the development of a new pension infrastructure platform.
This would help pension funds invest more in infrastructure, allowing them to pool their resources and invest in key infrastructure assets and projects.
The NAPF said that, if structured correctly, infrastructure assets could provide the investment profile that pension funds require. However, it said the current investment model makes it very difficult for pension funds to invest efficiently in infrastructure.
Joanne Segars, chief executive of the NAPF, said: “This could be a real win-win. The UK desperately needs to update its infrastructure, and pension funds are looking for inflation-linked, long-term investments.
“Pension funds hold over a trillion pounds in assets, but only around 2% of that is invested in infrastructure. There is the potential for that to be much higher. Infrastructure is a good fit with the needs of pension funds because projects like ports and power stations can offer a reliable return over a long timeframe.
“But at the moment many pension funds struggle with the mechanics of investing in infrastructure. They need a simpler financial vehicle that helps them to get on board with bricks and mortar.”
Alan Rubenstein, chief executive officer of the PPF, added: “We see infrastructure as a core component of the PPF’s investment strategy.†
“We therefore welcome the announcement, and the opportunity to work with the government and the NAPF to explore ways to remove barriers and facilitate opportunities for efficient investment in infrastructure projects.”
For more articles on pension fund investments