Friday, 06 March 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.

Readers' comments (7)

  • F451

    An interesting idea this one. Whilst it is great the government is finally recognising the value of investing in building as investing in growth (perhaps on Wednesday they will also remember the value of services in supporting growth) their source of investment raises debate.

    If the money we have paid into out pension funds is to be used for infrastructure then that infrastructure needs to deliver a return to the fund. Who will pay that return other than the contributers to the pension fund?

    If this money invested towards the government's priorities comes from our pockets and will deliver benefits back into our pockets, can it be described as akin to privatised taxation?

    I predict a move soon to make contributing to a private pension scheme becoming compulsory - at that time it will be crucial for people to argue for the termination of individual NI Contributions - or at least the honesty of recognising individual NI as Income Tax so that people can see a true measure of how much tax they are paying.

    There is also the little issue of making sure none of the pensions scheme owners make off with the money entrusted to them (not that such is ever likely of course!)

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  • There are some extraordinary and opaque things going on around infrastructure. The UK Treasury has been deciding which are the UK's 'top forty infrastructure projects' that merit priority funding, four of the biggest pension funds are reportedly in secret talks with the Coalition on how they will participate in funding, The FT headline last week was 'For sale sign goes up over UK infrastructure', at the weekedn the FT carried extensive reportage of the Chinese coming in as major funders of UK infrastructure... where does the taxpayer, the public, affected communities... or even our elected MPs figure in all of this? Housing share or (non-share) in whatever funding is 'prioritised' is, frankly, small potatoes when you start to ponder the bigger picture on what is going on here.

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  • F451 - privatised taxation indeed. A further concern, however, is what happens to people's pensions in future if these projects do not produce the anticipated returns? Not an unrealistic proposition either since if these projects were such eyecatching opportunities, I'm sure the banks and other private sector investors would be knocking down the doors trying to get a piece of the action.

    Isn't this just a case of Cameron gambling with the pensions of ordinary people because the wealthy don't want to take the risk?

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  • Sean Farley

    We will all be in hock to the Chinese by the time we come out of this financial crisis. The only way the Chinese will give us (and I include the EU and the US in "us") the benefit of their trade surplus is by getting a return out of us. The banks and governments will be forced to use China as the bank of last resort as our central banks struggle to secure further funding through gilt sales. Even Germany failed to auction all of its latest offer.

    The Chinese must be rubbing their hands together.

    This is all part of the transfer of riches or at least the reballancing of riches in the global economy. Expect to get relatively much poorer in the comming decades (at least if your are one of the 99%)

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  • abner arrow

    Government again is in a mix up as some of these projects can not be assumed as infra-structure. I believe the virtually bankrupt government will try to convince the pension contributors that the return of the investment will be guranteed by them. It means adding more debt on the top.

    After this I assume the only thing left to be sold to the foreign investers will be YOUR soul !

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  • F451

    Your soul was mortgaged by William III when he established the Bank of England based upon the potential wealth production of all the people in the land.

    Sexton - that means Death has been unemployed for a very long time!

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  • Council tenants definately do not want pension funds
    or the chinese taking over their homes and their futures!
    What will this lead to ? it seems the tories want to
    privitise council homes ,so as to increase rents higher
    and higher,and to diminish security of tenure.

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