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November 6, 2012 12:03 am
Eric Pickles will on Tuesday unveil plans to unleash £22bn of investment in infrastructure by allowing council pension funds to double the amount they can pump into local building projects.
The announcement comes as ministers scramble to find new sources of capital to upgrade British infrastructure and help revive the economy in the absence of government funds.
“Unlocking Town Hall pension pots so they can be used to invest in vital infrastructure projects is a common sense decision that will help this country complete on a global scale and get Britain building,” Mr Pickles said.
At the moment, local authority pension funds can invest a maximum of 15 per cent in limited partnerships – the asset vehicle used for significant property, private equity and infrastructure projects.
Mr Pickles will on Tuesday float the idea of increasing the limit to 30 per cent. A consultation on the issue is expected to run until mid-December.
The National Association of Pension Funds welcomed the proposal, although Joanne Segars, the chief executive, warned it would only remove one barrier to pension fund investments in large projects.
“The government [also] needs to undertake a comprehensive review of the local authority pension fund investment regulations to ensure that funds can act in the best interests of their members and council taxpayers,” Ms Segars said.
Last month, a number of the UK’s largest pension funds agreed to join the Pensions Infrastructure Platform (PIP), a government-backed scheme through which funds can invest in projects that fit their need for stable and long-term returns.
These included the BAE Systems Pension Funds, the BT Pension Scheme and the Railways Pension Scheme. A number of other funds are considering following suit, according to the NAPF.
However, the Financial Times reported last month that the PIP has so far attracted commitments of only £700m – only a third of the £2bn that the scheme hoped to raise in its first 12 months.
Although some in the industry are sceptical about the idea of large-scale pension fund investment in infrastructure, Mr Pickles believes his proposal will help spur economic growth.
“This is potentially a huge development and investment opportunity we simply cannot afford to ignore that also allows us to maintain long-term value for money for the taxpayer.”
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