The proposed reclassification of local authority pension funds as retail investors would put infrastructure investment at risk, pension experts have warned today.

Responding to the FCA’s proposals, the Pensions and Lifetime Savings Association (PLSA) warned the majority of infrastructure investment firms are structured to explicitly exclude retail investors.

With a recent survey showing 1.1% of council pension fund assets are invested in infrastructure, this would put £2.7bn investment at risk, according to the PLSA.

‘Reclassifying local authority pension funds as retail investors will prevent them from investing in certain asset classes such as infrastructure,’ said Graham Vidler, director of External Affairs at PLSA.

‘With LGPS funds investing billions in infrastructure right now, and at a time when the Government is calling for greater infrastructure investment by pension funds, these proposals are counterintuitive.

‘We urge the FCA to distinguish between the investment activity of local authorities and local authority pension funds, so the latter may retain its professional client status to continue its effective investment strategies.’

The PLSA also argued that the proposed opt-up provision for local authority pension funds to elected professional status would provide no guarantees that future investment strategies will be effectively executed with existing managers or on existing terms.

Council leaders have also called for a rethink of ‘flawed’ proposals that could ‘severely limit’ the investment options of half of UK local authorities.