Local government pension funds could soon be made available build more homes, roads or high speed railway under new proposals.
The proposals potentially allow councils to double the amount they can legally invest from their pension funds directly into key infrastructure projects in a new and more efficient way that ensures long-term value for the taxpayer. Lifting the restrictions controlling local pension investments could pump a further £22billion directly into job creating infrastructure projects.
The Local Government Pension Scheme England and Wales is administered by 89 separate local funds that hold combined investment assets worth £150billion.
Pension fund rules are there to make sure investment risks are spread across different types of investments to give taxpayers long-term protection. Fund managers are currently limited in the amount they can invest via partnership arrangements, which includes many types of infrastructure investment.
The proposals published for consultation today include an option to increase the current limit of 15 per cent to 30 per cent. This would clear the barriers standing in the way of better council investment giving them the scope to inject up to £45 billion in such arrangements. The consultation will run for 6 weeks from 6 November until 18 December 2012.
A recent report by the Future Homes Commission said council pension funds could be used to build key infrastructure projects like new homes in the UK without increasing the government deficit.
Investment decisions remain for individual local pension funds, which have a duty to protect the local council taxpayers, and local services and to ensure that there are no conflicts of interest.