News & Analysis

Report: UK local pensions help fund infra projects

Local authority pension funds in the UK are starting to step in to help fund some of the infrastructure projects that have been jeopardised by government cuts, reports suggest.

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UK pension funds to help
infra projects
The UK’s local pension funds are increasingly helping to fund some of the infrastructure projects that have been endangered by the newly-formed government’s spending cuts, according to a report in the Financial Times (FT). 

The newspaper highlights recent investments by the Greater Manchester and Lancashire pensions funds as an example of this trend. The two local pension funds invested in Evergreen – a 10-year, £300 million (€366 million; $464 million) regeneration fund for the North West of England – at the end of July.

The FT also points outs that the country’s 99 local authority pension funds are planning to pool their assets into a single investment fund, in a move that could save as much as £500 million a year in fees. A similar proposal is being considered by 11 regional authorities in Scotland, it added.

These moves are part of a broader rethink on the management of local municipal funds prompted by the financial crisis and the Icelandic bank collapse, the FT argues. They include the creation of a Public Sector Deposit Fund, a money market vehicle aimed purely at local authorities and other public bodies, due to be launched in October.

Seed money for the Public Sector Deposit Fund is already being pledged by local authorities and the fund is expected to be run by CCLA Investment Management, a UK-based fund manager which also manages a £1bn cash deposit fund for the Church of England, and a £1.5bn fund for charities.

The fund is aiming to provide a safe haven for UK Councils’ estimated £30 billion in cash deposits by targeting low risk investments. Local UK authorities are estimated to have lost about £1 billion with the Icelandic crisis.

Earlier in June this year, the Conservative-Liberal Democrat coalition government announced that capital spending would be halved in the period up to 2014. More than 60 projects in sectors such as transport, education and housing have already been halved, according to the news report.