The National Association of Pension Funds (NAPF) welcomed the Government’s consultation launched today (Tues) aimed at making it easier for local government pension funds to invest in infrastructure.
NAPF Chief Executive Joanne Segars said:
“We are pleased that the Government wants to increase or remove the limits that local authority pension funds can invest in infrastructure. This has the potential to remove a key barrier that is preventing some local authority pension funds from investing in this important asset class.
“The current LGPS investment regulations are out of line with current government policy. On the one hand, the Government says that pension funds should invest more in these projects, but on the other there are rules preventing this.
“Our local authority members have told us on many occasions that they cannot make important investments because of out-dated rules which place limits on the amount that can be invested in infrastructure. These regulations are no longer fit for purpose and need urgent reform.
“Together with our members, we lobbied for change and we are pleased that the Government has responded positively.
“Lifting this limit would remove one barrier, but there are wider issues that need to be addressed. The Government needs to undertake a comprehensive review of the local authority pension fund investment regulations to ensure that funds can act in the best interests of their members and council tax payers.”
Currently, local authority pension funds have a 15% cap placed on the amount they can invest through limited partnerships. Limited partnerships are the asset vehicle often used for major property, private equity and infrastructure projects.
A number of LGPS funds already invest around 15% of their portfolios in limited partnerships through property and private equity investments. This means that they have little capacity to invest in new infrastructure initiatives.
A new £2bn Pensions Infrastructure Platform is being created to facilitate pension fund investment in infrastructure. The fund will be created for pension funds by pension funds. Its founding investors include West Midlands Pension Fund and Strathclyde Pension Fund. The fund will invest in core infrastructure assets and will feature low leverage, low fees and inflation-linked cash returns of RPI+2 – 5%. The aim is to launch in the first half of 2013.
Notes to editors:
- The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.
- The NAPF represents 80% of local authority pension funds in the UK.
Paul Platt, Head of Media and PR, NAPF, 020 7601 1717 or 07917 506 683, [email protected]
Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]