Local authority pension funds will be able to double the amount they can invest in infrastructure projects from the beginning of next month, under plans confirmed by ministers yesterday.
The government has increased the cap placed on the share of assets council pension funds can invest through limited partnerships from 15% to 30%. These partnerships are legal structures which are often used for major property, private equity and infrastructure projects.
Doubling the limit was one of two options put out for consultation by Local Government Secretary Eric Pickles last November, with the other being to create a new dedicated investment class for infrastructure investment with a limit of 15%.
The government's response to the consultation shows that over half (51) of the 87 respondents favoured a simple doubling of the upper limit for investments through limited partnerships because it could be introduced quickly and avoid the 'complications' of creating a new category.
Local government minister Brandon Lewis said: 'Unlocking town hall pension pots so they can invest more in vital infrastructure projects will help this country compete on a global scale and get Britain building.
'By lifting the restrictions controlling local pension investments councils will now have the choice to invest more in local job-creating infrastructure and housing projects.'
According to the National Association of Pension Funds, a number of the 89 funds within the Local Government Pension Scheme already invest around 15% of their assets in limited partnerships through property and private equity investments and therefore have little capacity for new infrastructure investment.
NAPF policy director Darren Philp said he was 'pleased' the government had decided to change the 'out-dated' limits, but called for more to be done to address how council pension funds invest their assets.
'Lifting this limit will remove one barrier, but there are wider issues that need to be addressed. The government needs to undertake a comprehensive review of the local authority pension fund investment regulations to ensure that funds can act in the best interests of their members and council tax payers. We are pleased that the government has committed to exploring the possibility of wider reforms in this area.'
