28.05.12
Pension funds could provide investment for infrastructure
The Government could kickstart an investment spree into infrastructure through pension funds, a report by the CBI suggests.
If the Treasury guaranteed 10% of funding forgreenfieldprojects, such as HS2, this could significantly attract investment from the private sector. The proposal would also raise the assets’ credit rating from BBB- to BBB+.
Other recommendations include seconding infrastructure experts from the private sector to government departments, and pooling pension fund resources. Diverting 2% of the £1.5tn held by pension funds could create a pot of £20bn.
The CBI said: “We are looking for a small slice of their asset base, just a bit bigger than they have been willing to put in in the past. I do feel that we are pushing on an open door.”
CBI director-general, John Cridland, said: “We stick with the Government on the need for the public spending reductions. This will be off-balance sheet funding. We are not asking the Government to take the risk, we are asking them to facilitate the private sector taking the risk.”
Joanne Segars, NAPF (National Association of Pension Funds) chief executive, said: “Britain’s infrastructure is becoming an embarrassment and a bottleneck, and desperately needs a revamp. Pension fund money could be a key part of any solution.
“Pension managers are eager to get more involved with bricks and mortar, but often find it difficult to do so. Skills gaps, small fund sizes, investment fees, and fears over construction risk are all obstacles at the moment.”
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