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Osborne announces pension fund deal for £20bn infrastructure boost

Government reaches agreement with funds worth over £800 billion

The government has signed a memorandum of understanding with UK pension funds it hopes will bring £20 billion of new investment into UK infrastructure.

Chancellor George Osborne announced the deal with the National Association of Pension Funds which represents 1,200 funds holding around £800 billion in assets and the Pension Protection Funds which protects 12 million scheme members and has an investment portfolio of over £6bn.

The MOU sets out a new framework of how the parties will work together to help pension funds increase their investment in the nation’s ailing infrastructure.

Final details are still to be agreed by the parties but NAPF chief executive Joanne Segars said she was excited by the government’s commitment.

She said:  “This could be a real win-win. The UK desperately needs to update its infrastructure, and pension funds are looking for inflation-linked, long-term investments.

“Pension funds hold over a trillion pounds in assets, but only around 2 per cent of that is invested in infrastructure. There’s the potential for that to be much higher.”

Ms Seagars said projects like ports and power stations had the potential to offer reliable returns for investors but the mechanics of investing had previously put many funds off.

“They need a simpler financial vehicle that helps them to get on board with bricks and mortar,” she added.

PPF chief executive Alan Rubenstein said:  “We see infrastructure as a core component of the PPF’s investment strategy. We therefore welcome today’s announcement, and the opportunity to work with the government and the NAPF to explore ways to remove barriers and facilitate opportunities for efficient investment in infrastructure projects.”

The National Infrastructure Plan – an update to which will be published this week – identified the need for £200bn of investment in infrastructure over the next five years.

The vast majority is expected to come from the private sector.

Mr Osborne is due to provide further details on government’s approach to unlocking private sector investment in construction and infrastructure when he delivers the autumn statement on Tuesday.

For news, reaction and analysis to all the government’s announcements visit throughout the week.

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