The National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF) penned the deal for a new pension infrastructure platform with Chancellor George Osborne this morning.
The NAPF represents 1,200 pension funds and its members hold around £800bn in assets, while the PPF protects 12 million pension scheme members and currently has an investment portfolio of over £6bn.
A new investment platform could allow UK pension funds to pool their resources and allow them to invest in key UK infrastructure assets and projects in a new way.
Joanne Segars, Chief Executive of the NAPF, said: “We’re excited by the Government’s commitment to try to make it easier for pension funds to back major infrastructure projects, and we look forward to working on the details with them.
“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’s 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, CEO of the PPF said: “We see infrastructure as a core component of the PPF’s investment strategy.
“We therefore welcome today’s 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.”
The Memorandum of Understanding sets out the framework of how the Government will work with the NAPF and PPF to help facilitate and increase their investment in infrastructure.
The Government is targeting an additional £15-20bn of new investment in UK infrastructure.
