UK – The London Pensions Fund Authority (LPFA) has said the UK government missed an opportunity on announcing future infrastructure spending to focus on the merger of local government pension schemes (LGPS).
Commenting after Danny Alexander, chief secretary to the Treasury, detailed proposals for £100bn (€117bn) in capital spending – focusing on road projects, high-speed rail services and house construction from 2015 onwards – LPFA chairman Edi Truell welcomed the focus on "much-needed areas" such as residential property.
However, Truell said there was an "additional missed opportunity" for fostering infrastructure investment.
"Creating pensions super pools – in effect, UK sovereign wealth funds – would open up billions of pounds of capital for investment in this country's future," he said.
"Infrastructure is an ideal long-term investment for pension funds, and local governments in England and Wales are sitting on schemes totalling £150bn.
"Unfortunately, these are administered by 89 separate entities and as such are unable to invest heavily in UK infrastructure owing to a lack of scale."
The LPFA has been one of the drivers behind the debate to consolidate the LGPS system, with proposals for a London Pensions Mutual drawn up last year.
In the policy paper accompanying Alexander's speech on Thursday, the Treasury only briefly touched on pension funds and, more broadly, institutional investors as a source of income.
It mentioned a number of investors, including Legal & General and M&G, as aiding in the shift away from traditional bank financing for larger infrastructure projects, and noted the "progress" by the National Association of Pension Funds and the Pension Protection Fund in launching the Pensions Infrastructure Platform (PIP).
However, chancellor George Osborne's announcement on Wednesday that the UK Guarantee scheme will be extended by two years, now covering projects launching as late as December 2016, will be of interest to risk-averse investors such as the PIP, which has so far to state whether it will consider taking on construction risk.
Employer lobby group CBI warmly welcomed the extension.
Katja Hall, CBI chief policy director, said: "It's clear the coalition now sees it was wrong to cut capital spending so deeply in 2010.
"Long-term growth needs long-term investment – investing an extra £15bn over the next Parliament will go some way to redress the shortfall."
She added that extending the UK Guarantees scheme, which underwrites private sector investment of certain infrastructure projects deemed vital by the government, was a "no-brainer".
"Potential investors have been put off by the impending cliff-edge next year," she said.
