LONDON (Reuters) - Local government pension schemes want more freedom to mobilise their billions of pounds of assets to spend on roads, power stations and other infrastructure, arguing such a move would chime with central government efforts to boost investment.
The government has been pushing private sector pension funds to invest more in infrastructure as part of efforts to boost growth, but regulations limit what the 99 local government pension funds - with total assets of 143 billion pounds - can do with their money.
“On the one hand, the government is trying to encourage investments in infrastructure from pension funds, while on the other hand, the rules that another government department have (for such an investment) are counterproductive,” said Mike Taylor, chief executive of the London Pension Fund Authority (LPFA).
The LPFA is one of the UK’s largest local government schemes with assets of over 4.2 billion pounds.
“We are going to launch a concerted action over the next few weeks urging government ministers to change this limit or give us some more leeway,” Taylor told Reuters.
The National Association of Pension Funds (NAPF) - the umbrella body whose members have assets of over 800 billion pounds - is also throwing its weight behind the campaign.
“We have recently written to the government asking them to lift these rules,” said Joanne Segars, chief executive of the NAPF. “With the focus on infrastructure, now would be the pertinent time for the government to act.”
Local government pension funds are allowed to invest only up to 15 percent of their assets in partnership structures, such as limited partnerships, which are common among real estate, private equity and infrastructure funds.
With most funds already allocating to private equity and real estate, many are finding that any new allocation to areas such as infrastructure are pushing up against the cap.
Segars said that as private sector pensions funds are not subject to any kind of investment restrictions, it was unfair for local government schemes to be limited in their investments.
“We think the rationale behind the rules are out of date and out of place. Local authority pension funds should have the same sort of ‘prudent person’ principle that private sector pension schemes have,” she added.
Last November, Chancellor George Osborne announced plans to raise 20 billion pounds from pension funds to help fund government projects from high-speed rail lines to power stations.
Editing by David Holmes