Pension schemes plan to increase investment in British infrastructure

Almost two thirds (62%) of UK pension scheme leaders are expecting to increase their investment in British infrastructure over the next 12 months, according to new research conducted by Censuswide on behalf of GLIL Infrastructure (“GLIL”).  

The findings, from a survey of 300 pension scheme leaders in the UK, come as the UK grapples with funding its future infrastructure needs, and schemes deal with liquidity considerations in the wake of the LDI concerns. 

When leaders were asked about the main driver of their plans to increase investment in UK infrastructure – over and above their primary fiduciary responsibilities to members – supporting the UK’s net zero ambitions was the top response, cited by more than a third (36%). 

Delivering stable, inflation-linked returns (33%) and powering the UK economy (32%) were the next most popular drivers of greater investment in the asset class.      

However, leaders also highlighted the challenges to increasing their exposure to UK infrastructure.

A fifth (20%) said the need to keep sustainability at the core of investment pipelines was the biggest obstacle, while 18% cited a lack of suitable investment opportunities, ahead of planning concerns (16%) and political (16%) and economic (14%) instability.

Ted Frith, chief operating officer at GLIL Infrastructure, said: “The UK needs significant investment to meet its future infrastructure needs, so it’s encouraging to see so many pension scheme leaders are planning to allocate further capital to the asset class. 

"The capital they have to deploy can make a huge difference.  

“Infrastructure helps pension schemes to make a valuable contribution to society as well as provide stable returns for their members, at a time where investment activity is under more scrutiny than ever before."

He added pension scheme members have access to reliable, inflation-linked returns, and a stake in projects that are supporting the transition to a more sustainable, lower carbon economy. 

"These benefits are borne out in the findings of our survey," said Frith, while adding it was also clear more needs to be done to increase the supply of infrastructure investment opportunities with the appropriate risk versus reward profile for pension schemes.

More than two thirds (67%) of UK pension scheme leaders surveyed by GLIL also said they are planning to prioritise UK-based infrastructure projects over opportunities in overseas markets. 

And while nine in 10 (91%) pension scheme leaders say the government’s infrastructure policies adequately support the UK’s net zero ambitions, they also believe policymakers can do more to encourage greater investment in UK infrastructure. 

Of the pension scheme leaders polled, more than half (56%) of their infrastructure investments are currently UK-based. 

Levelling up (47%) was cited as the policy that would encourage pension scheme leaders surveyed to increase their UK infrastructure investments the most, if successfully delivered, followed by the Chancellor’s Edinburgh Reforms (44%) and the National Infrastructure Strategy (41%). 

Frith added: “We know first-hand that UK pension schemes want to invest in infrastructure projects that have a real-world benefit to their members’ communities. 

"It’s one of the reasons why the vast majority of our investments are located in the UK. 

“Anything that policymakers can do at a national and local level to provide more investable projects will be welcomed, but it’s clear that addressing an historic lack of investment in deprived areas of our country is something a significant amount of pension scheme leaders still want to see prioritised.”

GLIL Infrastructure is the £3.6bn infrastructure investment fund backed by local government pension schemes and the government-established DC workplace pension provider Nest.