The Chancellor’s pledge to make it easier for pension funds to invest in infrastructure has been described as ‘naïve’ and a ‘damp squib’ by senior figures in the pensions sector.
Society of Pensions Professionals president and Spence & Partners director Hugh Nolan described the plan, designed to encourage long term investments in infrastructure projects as ‘naïve’, given most sponsors’ aims of getting rid of their DB liabilities as soon as possible.
Former pension minister and Royal London director of policy Steve Webb said the policy initiative had been overegged, when all the Treasury had done is ask the Pensions Regulator to clarify guidance around existing rules.
But some in the industry have welcomed the initiative, arguing institutional investors would be interested in the diversification that infrastructure can offer.
Nolan said: “The idea of facilitating pension scheme investment in long-term assets has some merit in theory but is extremely naive, given the drive for companies to ditch DB schemes as soon as they can, with immense value pressure on short-term funding until they do.”
Webb said: “If the Government is serious about unlocking more pension fund money to spend on infrastructure, this Budget announcement is likely to be a damp squib. The small print of the Budget says that all this amounts to is simply asking the Pensions Regulator to ‘clarify the guidance’ given to pension funds about long-term investment. If we want to see serious money being invested by pension funds in infrastructure we need a supply of projects that pension funds can invest in, not minor tweaks to rules and guidelines.”
Mercer global head of infrastructure Toby Buscombe said: “We welcome the Government’s announcements on a range of new infrastructure initiatives. Depending on the detail of individual projects and how they are to be financed this could be good news for a range of institutional investors. Infrastructure investment can provide a portfolio enhancement for many investors by diversifying away from traditional financial market risk whilst adding a source of return stability and value preservation.”
Aon Hewitt partner Lynda Whitney said: “Although pension fund access to long term investment made the main text of the Budget speech, this does not appear to be the prelude to a major announcement, but part of the long term Government idea that pension schemes could be a route to get more infrastructure investment. It is expected to be part of a small policy nudge that will be delivered by the Pensions Regulator not a significant new opportunity for pension schemes.”
