Government infrastructure bank to partner with pension funds to support investment

Jonathan Stapleton
clock • 3 min read
Government infrastructure bank to partner with pension funds to support investment

The government will set up an infrastructure bank to support investment and to co-invest alongside investors including pension funds.

The National Infrastructure Strategy - published today - sets out the government's plans to transform the UK's infrastructure networks. It is based around three central objectives - economic recovery; levelling up and strengthening the union of the United Kingdom; and meeting the UK's net zero emissions target by 2050.

To underpin this infrastructure strategy, the government said it would set up a new infrastructure bank for the UK to play a "leadership role" in supporting private infrastructure projects.

It said this bank would co-invest alongside private sector investors including pension funds - working with them to explore opportunities for a further expansion of pension fund investment in UK infrastructure.

The government has already made changes in a bid to make it easier for pension funds to invest in infrastructure.

In March this year the Financial Conduct Authority (FCA) made changes to their ‘permitted links' rules to allow unit linked pension funds, which are widely used for contract-based pensions investments, to invest in a wider range of illiquid assets.

The recently published Solvency II Review Call for Evidence also sought views from stakeholders on potential areas in which Solvency II could be reformed to better incentivise insurers, who run contract-based schemes, to invest in infrastructure and other long-term productive assets.

In addition to this, the Department for Work and Pensions is currently considering a number of changes to remove barriers to infrastructure investment through its consultation on changes to the calculation of the default fund charge cap for automatic enrolment schemes to allow greater flexibility for performance-based fee structures and thereby remove a barrier to investment in longer term assets like infrastructure.

The National Infrastructure Strategy - published today - sets out the government's plans to transform the UK's infrastructure networks. It is based around three central objectives - economic recovery; levelling up and strengthening the union of the United Kingdom; and meeting the UK's net zero emissions target by 2050.

To underpin this infrastructure strategy, the government said it would set up a new infrastructure bank for the UK to play a "leadership role" in supporting private infrastructure projects.

It said this bank would co-invest alongside private sector investors including pension funds - working with them to explore opportunities for a further expansion of pension fund investment in UK infrastructure.

The government has already made changes in a bid to make it easier for pension funds to invest in infrastructure.

In March this year the Financial Conduct Authority (FCA) made changes to their ‘permitted links' rules to allow unit linked pension funds, which are widely used for contract-based pensions investments, to invest in a wider range of illiquid assets.

The recently published Solvency II Review Call for Evidence also sought views from stakeholders on potential areas in which Solvency II could be reformed to better incentivise insurers, who run contract-based schemes, to invest in infrastructure and other long-term productive assets.

In addition to this, the Department for Work and Pensions is currently considering a number of changes to remove barriers to infrastructure investment through its consultation on changes to the calculation of the default fund charge cap for automatic enrolment schemes to allow greater flexibility for performance-based fee structures and thereby remove a barrier to investment in longer term assets like infrastructure.

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