A fifth of the UK’s £1trn (€1.11trn) infrastructure investment shortfall could be plugged by pension risk transfer (PRT) capital over the next decade, according to Legal & General (L&G).

The insurer has made the case for insurers to allocate £200bn to UK infrastructure from their growing PRT businesses – where insurers take on the assets and liabilities of UK defined benefit pension schemes, also known as bulk annuities.

L&G was one of the first insurers to enter the PRT business, a sector that L&G expects to grow by £770bn in the next 10 years.

Laura Mason, CEO, Legal & General Retirement Institutional, said: “By working with other insurers, we can use pensions savings to help plug part of the UK’s £1trn infrastructure gap, secure customers’ pensions and encourage the economic recovery.

“As an insurer, we have an important role to play by deploying pension funds to create a virtuous circle where older UK savers are funding infrastructure investments – creating jobs, homes and roads for other generations.”

The report, ’The power of pensions: How pension savings can help to build the UK’s infrastructure and drive growth in all regions’, says infrastructure is key to maintaining the long-term competitiveness of the UK economy and is vital to delivering the government’s modern industrial strategy.

“Regions across the UK are calling out for investment in transport, homes and energy in order to bring infrastructure up to where it needs to be to support our society’s needs,” the report says.

L&G said this regional activity will also bring the “economic stimulation and employment opportunities that the UK desperately needs” as it looks to recover and rebuild following the impact of COVID-19.

The report calls for a renewed government commitment to collaborate with the private sector in delivering projects worth between £100m and £1bn across the UK.

Nigel Wilson, CEO of Legal & General Group, said in order to have a strong and competitive economy on the world stage, the “UK needs to invest a significant sum into improving its infrastructure” and levelling up all regions.

“Long-term investors like L&G have an important role in delivering regeneration, housing, transport and renewable energy investment by harnessing the ‘power of pensions’.

“We believe this is an important way to make inclusive capitalism a reality, investing for good whilst securing pension payments for millions of people.”

The full report can be found here

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