The London Pensions Fund Authority (LPFA), one of the largest local government pension scheme (LGPS) funds in the UK, has signed up to the pensions infrastructure project (PIP). The £2bn investment fund backed by corporate and local pension funds is meant to deliver long-term, inflation-linked returns and boost economic growth.
Independent of the government, the PIP – an initiative launched by the National Association of Pension Funds (NAPF) – has been established with the support of 10 pension funds. The fund will have aggregate commitments of more than £1bn from founding signatories including the BT, Lloyds and British Airways pension funds, and will eventually reach £2bn.
According to the LPFA chairman Edmund Truell, while investment through the PIP will be dedicated to pre-existing infrastructure projects, freed funding will also allow the government to commit to new construction of schools, hospitals and roads.
“The government has estimated funding needs of between £40bn and £50bn in infrastructure annually over the next decade,” he said, “and this new fund will form a material part of meeting those needs. We are delighted to able to support this initiative while at the same time being confident that our funds will enjoy attractive, risk-mitigated returns.”
And the LPFA chief executive Mike Taylor reckoned this was the start of what he expected would become “a real boon” for UK pensions management and for the economy and society at large.
“The LPFA is committed to meeting its liabilities for the long-term benefit of pensioners, and the PIP achieves that,” he said. “Aggregating smaller pools of assets under a larger management structure makes sense for infrastructure investing, allowing us to provide the scale of funding these large projects require, increasing our bidding power, providing better access to expertise and lowering fees.”