Pension industry gives a boost to infrastructure

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The Independent Online

The Government's widely questioned push to kickstart the economy though luring pension funds to cough up the cash to build new roads, waste facilities and prisons received a welcome boost today.

The pension industry confirmed that it has secured two new backers for a pooled fund to invest in infrastructure projects. As revealed by The Independent on Sunday last month, this means that the Pensions Infrastructure Platform (PIP) now has £1bn to play with, after Lloyds TSB and the London Pension Authority agreed to join existing investors such as BT and defence giant BAE systems.

Chancellor George Osborne has been criticised for arguing that pension funds should risk money on building infrastructure, as historically they have only been interested in investing in the likes of schools and hospitals once they have been operational for a few years.

During construction, there are far more risks, such as labour cost hikes and contractual disputes, that can hurt investors – and pension fund managers are typically cautious souls.

However, PIP – which was the brainwave of industry body National Association of Pension Funds – means that the financial risk is spread among many investors while still securing a large warchest. Chief executive Joanne Segars said that PIP will make it "easier" for pension funds to "explore this asset class".