Why insurers, not pension schemes, have taken the infrastructure challenge

BENDERThe announcement this morning of  the National Infrastructure Plan (NIP) includes the government selling off its 40% stake in the Eurostar rail service.

In all, about £375bn of investment in energy, transport, communications, and water projects is planned.

You can see the kind of projects that are likely to benefit from this new money by skimming  though the list the Government published. These are only the tip of the iceburg and the list doesn’t add up to a row of beans compared with the costs of HS2 or indeed a new runway at Heathrow/airport in the estuary. All the same, it’s nice to know that your premiums are going to pay for things that will do us all some good..like

  • a further £50m for a redevelopment of the railway station at Gatwick Airport
  • a government guarantee to support finance for the development of a new nuclear power station at Wylfa, north Wales
  • confirmation that a UK guarantee has now been agreed for the £1bn Northern Line extension to Battersea, in London
  • funding for improvements to the A50 around Uttoxeter, in Staffordshire, to start no later than 2015-16

It looks too that the Government will be shifting its investments in existing projects to the funding of new infrastructure; the target for the sale of corporate and financial assets will be doubled from £10bn to £20bn between 2014 and 2020, including the government’s shareholding in Eurostar

Simultaneously to the NIP announcement, the insurance industry is unveiling that it will invest £25bn in infrastructure projects.

The decision by insurers L&G, Prudential, Aviva, Standard Life, Friends Life and Scottish Widows to invest in infrastructure follows changes in European rules pushed for by the UK which incentivise investment in a wider range of assets

Well done to the mighty six and well done to the ABI for getting a few heads banged together. But what of the NAPF and their well publicised policy of raising an infrastructure fund from their members?

Ironically, it is from Britain’s unloved insurers that we see long-term investing and

Nothing so demonstrates the shift in confidence among long-term investors in the UK than this announcement. Ten of fifteen years ago, when pension schemes looked to the future as an opportunity to shine, this opportunity would surely have been grabbed with both hands.

For those who romantically associated the NAPF and the large occupational schemes with the vision to fund these projects , this may come as a surprise but the time horizons of those who govern these schemes and those who fund them have been slashed.

The target of most FDs is now to wind their scheme up as soon as possible. The Flight path has killed long-term thinking and try as consultants such as Redington might to instill a love in the long-term investment market, the reality is that occupational schemes are no more buying into the future of our infrastructure as they are into the future of their defined benefit plans.

Whether a boat was part of the infrastructure plan I don’t know, but it looks like occupational schemes have missed it!

Meanwhile, the Insurers, who had seen their share of the workplace pension market decimated in the 90s have stepped up to the plate.  Fifteen years ago, would they have been considered the long-term investors they are today?. True not all the mighty 6 are not workplace pension providers but all have suffecient skin in the game – providing long-term benefit, to have picked up the baton.

Ironically, it is from Britain’s reviled insurers that we see long-term investing. Perhaps it is time for us to look again at these mighty six British insurers and give them a pat on the back! Britain’s proud of you!


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Why insurers, not pension schemes, have taken the infrastructure challenge

  1. Louise Inward says:

    Hmm. The “mighty six” were a bit slow off the mark – Pension Insurance Corportation have invested over £2bn in UK infrastructure in the last two years – including the first ever UK listed solar bond. We also published a white paper on what government could do to make it easier for pension schemes to invest – http://tiny.cc/picinfr

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