Pension funds look to invest

 
Tim Wallace
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TALKS are beginning to work out how the government can harness tens of billions of pounds in pensions funds’ cash to boost infrastructure spending, the Treasury and pensions industry announced yesterday.

A memorandum of understanding was signed by the Treasury, the National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF) signalling that they will co-operate to develop a new investment platform.

The government wants to see £200bn in new infrastructure investment over the next five years, and wants £15 to £20bn to come from pension funds.

As the funds look to provide long-term returns for savers, they hope infrastructure projects, like toll roads and energy generation, will match their risk and return profiles.

“Working together on a new investment platform will help our industry match the level of investment seen in other countries by pooling resources and expertise,” said NAPF chief executive Joanne Segars (pictured).

“The level of investment will depend on the yields investors can expect.”

PPF chief executive Alan Rubenstein believes all participants are keen to make quick progress.

“I would be very surprised if nothing new was announced before the next budget,” he told City A.M.

ANALYSIS l Growth down, deficit up
Back in March, the Office for Budget Responsibility (OBR) forecast GDP growth of 1.7 per cent in 2011 and 2.7 per cent in 2012. But that will be cut back on Tuesday.

Growth 1% Expected 2012 revision

The Treasury’s review of independent forecasts shows an average forecast of just 1.0 per cent both this year and next – meaning less cash for Osborne to spend.

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Osborne is ahead of his deficit-cutting plan, but not by much. Falling GDP growth means he will only eliminate the deficit in 2017, not 2015, according to Barclays.

Deficit £117bn Expected 2012 revision

The OBR forecast in March put borrowing at £121.8bn this year and £101bn next year. But independent economists believe it will be closer to £129.1bn and £117bn.