A total of ten pension funds are now signed up to a government-backed scheme to provide investment capital for major infrastructure projects.
The National Association of Pension Funds announced yesterday that the London Pension Fund Authority and Lloyds TSB had become the latest funds to commit to the initiative, which is known as the Pensions Infrastructure Platform.
Each of the 10 investors has made a 'soft' commitment of £100m to the PIP. This means that if the platform does get up and running it will be half way to the target of £2bn it aims to invest in 'core' infrastructure projects that are free of construction risk and not subject to usage. This is expected to include regulated utilities and non-toll roads.
The NAPF is setting up the platform in conjunction with the Pension Protection Fund and Treasury, although it will be fully independent of government. NAPF chief executive Joanne Segars said: 'We have made excellent progress to secure £1bn in just over a year, and we are pleased to welcome two more funds on board.
'Infrastructure projects can be a very good match for pension fund liabilities, but so far UK pension funds have struggled to explore this asset class. This new platform will make it much easier for them to do so.'
Edmund Truell, chair of the LPFA, said he was confident that the PIP would provide 'attractive, risk-mitigated returns' to enable the fund to meet its liabilities for the long-term benefit of pensioners.
Eric Stobart, chair of the investment and funding committee of the Lloyds TSB Group Pension Schemes, added: 'Infrastructure, when available in appropriate structures, should be an attractive asset class to UK pension schemes and the PIP should be an important step in making infrastructure more accessible.'
According to the NAPF, the PIP remains on track to launch in the first half of this year. A corporate administration structure is in place and consultancy PricewaterhouseCoopers had been hired to provide support in selecting a manager for the platform.
For the platform to be formally established, its investment criteria, asset preferences and fee structures will need to be agreed and, if required, Financial Services Authority approval will be sought. As and when these stages are completed, the founding investors will provide their capital.
The other funds involved as founders of the PIP are: British Airways Pension Scheme; BAE Systems Pension Funds; BT Pension Scheme; the Pension Protection Fund; Strathclyde Pension Fund; Railways Pension Scheme; and West Midlands Pension Fund. The final fund does not wish to be named.