Pensions Unite on UK Infrastructure Push

Pension funds in the UK are uniting for a coordinated push towards infrastructure investing.

(October 18, 2012) — Some of the largest pension funds in the United Kingdom have thrown their support behind the sector’s government-backed push into infrastructure investing, enabling it to move to the next stage of development.

Pension funds run by defence group BAE Systems and telecoms giant BT, the UK’s largest plan, are to be joined by The Railways Pension Scheme and two of the largest public sector funds in the country as Founding Investors to the Pensions Infrastructure Platform (PIP).

The announcement was made today by the National Association of Pension Funds (NAPF) at the organisation’s annual conference in Liverpool.

Joanne Segars, NAPF CEO, said: “This is excellent progress and marks an important milestone in the PIP’s development. There is a lot of work still to do, but we are confident of making further progress and launching next year.”

The NAPF said that with these Founding Investors on board, work would be able to start on the detailed development of the PIP, a key next step of which would be the selection of a manager to run the platform. Investment criteria, asset preferences and fee structures would also be agreed on, and authorisation from the UK’s financial regulator, if needed, would be sought.

The organisation said that once this groundwork was completed, the Founding Investors would provide investment capital with a view to launching the platform in the first half of next year. The PIP is open to pension investors of any size.

The PIP initiative was launched by the NAPF and the UK’s lifeboat for bankrupt company schemes, the Pension Protection Fund (PPF). Its aim was to raise £2 billion to invest in infrastructure projects around the country. The scheme was backed – in ethos rather than financially – by the government.

The NAPF and PPF have been encouraging pension funds of all sizes to commit to the PIP, which should provide long-term, inflation-linked investments.

Frank Naylor, head of strategy at British Telecom Pension Scheme Management, said: “The PIP provides an excellent opportunity to invest in core UK infrastructure alongside like-minded UK pension schemes. We look forward to a widening of the opportunities for UK pension schemes to invest in infrastructure assets which are structured to provide the right characteristics.”

While some of the largest funds from Canada and Australia have invested in this asset class for some time, most pension funds around the world have only recently been making allocations to infrastructure projects, due to the investment characteristics fitting with their liability profiles. Larger schemes have brought on specialist teams, whereas smaller funds have mandated investment managers to source opportunities.

David Adam, CIO at BAE Systems Pension Funds, said: “We believe the PIP is an important development that will help schemes like ours gain access to infrastructure on terms that are aligned to the long-term interests of pension funds.”

The large corporate plans will be joined by Strathclyde Pension Fund and West Midlands Pension Fund and there are several other pensions interested in the PIP, according to the NAPF.