The chancellor’s plan to boost infrastructure investment using pension funds appears to have floundered after an industry leader suggested more must be done to mitigate the risks.
George Osborne made the scheme - dubbed ‘British savings for British jobs’ - a central plank of his National Infrastructure Plan and suggested as much as £20bn could be raised to pay for a shopping list of projects.
As part of the plan, the Government, the National Association of Pension Funds (NAPF) and Pension Protection Fund (PPF) signed a memorandum of understanding to create the Pension Investment Platform (PIP) in 2011 with the aim of creating an investment vehicle that would raise £2bn in its first year.
PIP has only recently passed the £1bn mark and while it is fully independent of Government, its chief executive suggested it would need more support from ministers on either mitigating risks or underwriting schemes.
Speaking to the Financial Times, Mike Weston, said: ‘If the government wants to attract pension funds, it needs to mitigate the risks.’
A PIP spokeswoman told Transport Network that pension funds were likely to want some kind of specific mitigation or underwriting for construction projects as construction carries its own inherent risks, which could often be too high for pensions.
In a statement, Mr Weston added: ‘PiP has been working with established asset managers to deliver attractively structured and priced specialist infrastructure investment funds for pension funds small and large, and has now helped secure £1bn of commitments for investment into UK infrastructure − further evidence of the progress PiP is making in delivering a range of infrastructure opportunities tailored to the specific needs of UK pension schemes.
‘The next step is the development and authorisation of PiP as a direct infrastructure investment manager “by UK pension schemes, for UK pension schemes”, and we hope to announce further news on this later in the year.’