The Government has confirmed that a ‘platform’ allowing UK pension funds to invest around £2 billion will be launched in January 2013, with seven funds already committed to help set up the new infrastructure with start up costs and initial capital allocations.
The Treasury are set to work with the National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF) to allow UK pension funds to invest directly in infrastructure assets and projects in a new and more efficient way.
The department expects the platform to raise its expected £2 billion by January to start investing in UK infrastructure projects.
An increase in pension funds’ investment in infrastructure was first proposed in last year’s Autumn Statement, as it was felt that there were some long-standing weaknesses in the quality of some of it.
But the biggest challenge will be to attract the necessary investment, as more than £200 billion of infrastructure investment is needed in the next five years alone. Investment is open to all UK pension schemes.
In connection with encouraging this investment, the Parliamentary Bill designed to set up the UK Infrastructure Guarantee Scheme, offering as much as £40bn for infrastructure investors, had its first reading on September 5. The Government is also seeking investment from sovereign wealth funds and institutional investors overseas.
There is a need for alternative forms of finance and finding ways of mobilising more pension scheme capital would make sense, as European turbulence in traditional risk assets means that clients are looking for stable, long-term alternatives. However, potential investors should be aware of the drawbacks, such as political uncertainty and lack of liquid assets
Investing your pension fund in the right assets is a crucial part of planning for your retirement. Factors such as your age, your risk profile and how much you can afford to lose (or are willing to lose) must all be considered.
If you need input on where your pension fund is invested, or don’t know where it’s invested then contact me and I’ll be happy to help.
Steve Horton is a Chartered Accountant and a Chartered Financial Planner who specialises in helping clients to manage their pensions and investments