Friday, 03 July 2015

Housing to gain from £30bn infrastructure fund

The social housing sector could be in line to benefit from a multi-billion pound government deal to encourage pension funds to invest in infrastructure projects.

The government hopes that £20 billion of its proposed £30 billion National Infrastructure Plan will come from the UK’s pension funds after the National Association of Pension Funds and the Pension Protection Fund signed a memorandum of understanding yesterday.

The remaining funding could come from further cuts to public spending, although the government has also said it will look to Chinese investors for support. Writing in the Financial Times this morning, the head of the China Investment Corporation said it would look to invest in infrastructure projects.

Members of NAPF, which represents 1,200 funds, hold around £800 billion in assets.

Joanne Segars, chief executive of the NAPF, said: ‘We’re excited by the government’s commitment to try to make it easier for pension funds to back major infrastructural projects, and we look forward to working on the details with them.

‘This could be a real win-win. The UK desperately needs to update its infrastructure, and pension funds are looking for inflation-linked, long-term investments.

‘Pension funds hold over a trillion pounds in assets, but only around 2 per cent of that is invested in infrastructure. There’s the potential for that to be much higher.

‘Infrastructure is a good fit with the needs of pension funds because projects like ports and power stations can offer a reliable return over a long timeframe. But at the moment many pension funds struggle with the mechanics of investing in infrastructure. They need a simpler financial vehicle that helps them to get on board with bricks and mortar.’

Major transport projects are expected to be the main beneficiaries from the investment push. However, social housing has also been cited as a potential source of low-risk investment for pension funds.

The move comes ahead of George Osborne’s autumn statement to Parliament tomorrow, in which the chancellor is expected to outline government spending plans.

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