Plans to invest local government pension schemes in major infrastructure projects have been criticised as too risky by trade union GMB.

Yesterday, chancellor George Osborne announced plans to merge 89 pension funds into six new regional funds to increase investment in infrastructure.

However, GMB warned that council workers’ pensions should be invested as ‘efficiently as possible’.

Brian Strutton, GMB national secretary, said: ‘Combining council workers' pension funds will not lead to more investment in UK infrastructure unless government underwrites the rate of return available.

‘The only reason more of the £200 billion of Local Government Pension Scheme (LGPS) assets are not invested in infrastructure is because the risk outweighs the returns.

‘Mr Osborne needs to remember these are council workers' pension savings that need to be invested as efficiently as possible, they are not to be used as politician’s playthings.’

Unison also warned that any changes to how pension funds are invested should be done to get the best return for local government staff. It is calling the costs of pooling the funds to be fully transparent, and for decisions to include members.

Unison general secretary, Dave Prentis, said: 'The chancellor shouldn’t use our pension funds as a convenient way of making up for the infrastructure investment that no longer happens. Nor should they be used as replacement capital for the government’s privatisation programmes.

'PFI has been a disaster for both the pension funds investing in it and the public authorities who are now having to pick up the costs. Yet another abuse of our members’ pension funds cannot be allowed to happen.'