Pension ‘superfunds’ should be created to invest in infrastructure as part of Britain’s post-Covid recovery, a think tank has argued.
A new report published by the Social Market Foundation (SMF) and sponsored by Tidal Power Limited proposes merging UK pension funds to create fewer, larger funds which would be able to invest large sums in big long-term projects.
The think tank said that ministers preparing for a post-coronavirus recovery should be ready to spend public money to support innovative ‘pathfinder’ infrastructure projects and new renewable energy markets.
Priority should also be given to ‘shovel-ready’ projects that support domestic supply chains and employment, according to SMF.
The Government launched consultations on pension consolidation and the creation of ‘superfunds’ in 2018 and 2019 but ministers have yet to announce decisions.
The SMF said that the need to support an economic recovery with infrastructure projects meant ‘urgent action’ is now needed on pension reform.
Investment rules should also be reformed to allow the new funds to pay the management fees often involved in running big infrastructure projects.
‘The best way to support the infrastructure the country urgently needs in the long-run is to make better use of the billions of pounds held in pension funds that could be profitably invested in helping Britain on its way to a green recovery,’ said Richard Hyde, senior researcher at the SMF.
‘Ministers should move quickly to encourage the creation of pension superfunds like those in Australia and Canada.
‘In the short-term, ministers looking to get infrastructure projects up and running and providing jobs should be prepared to spend directly to support pathfinders that can prove to investors that it is safe to invest in similar projects. That means taxpayers bearing more of the risk, but the long-term rewards justify that risk.’
