Councils have been given freedom to double the amount of pension assets they could invest in local infrastructure projects from 15% to 30%, potentially freeing up an additional £22bn to fund pro-growth schemes, ministers have announced.
The news follows a consultation into lifting existing caps limiting how much the 89 Local Government Pension Scheme (LGPS) funds with combined assets of around £150bn - can invest in limited partnerships – the asset vehicle often used for major property, private equity and infrastructure projects.
As a result of the new regulations, a total of around £45bn of LGPS funds could be available for house-building, transport or regeneration projects – a move which would boost chancellor George Osborne’s plan to raise £20bn of cash for infrastructure projects over the next decade in the run-up to the Budget.
Last month the London Pensions Fund Authority (LPFA) joined two other LGPS funds the Strathclyde Pension Fund and West Midlands Pension Fund in signing up to the Pensions Infrastructure Project (PIP) – which has a shot-term target of securing £2bn from large retirement pots by 2013, in order to kick-start major projects.
Local government minister, Brandon Lewis said: ‘Unlocking town hall pension pots so they can invest more in vital infrastructure projects will help this country compete on a global scale and get Britain building.
By lifting the restrictions controlling local pension investments councils will now have the choice to invest more in local job-creating infrastructure and housing projects.’
Director of the National Association of Pension Funds, Darren Philp said: ‘Lifting this limit will remove one barrier, but there are wider issues that need to be addressed. The Government 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 tax payers.’