Government proposals could lead to up to £45 billion in local authority pension fund investments being used to fund infrastructure projects, such as building homes and high-speed railways.
Proposals outlined in the Local government pension scheme: investments in partnerships consultation could allow councils to double the amount they are able to legally invest from pension funds directly into infrastructure projects.
The consultation is focused on the amount fund managers are able to invest via partnership arrangements, which include a number of types of infrastructure investments.
Currently, pension funds can invest up to a mamimum of 15% of their funds in infrastructure. Under the government’s proposals, it is considering raising this limit to 30%.
There are currently 89 local authority pension funds that hold combined investment assets worth £150 billion.
Eric Pickles, local government secretary, said: “Unlocking town hall pension pots so they can be used to invest in vital infrastructure projects is a commonsense decision that will help this country compete on a global scale and get Britain building.
“By lifting restrictions controlling local pensions’ investments, councils could pump a further £22 billion directly into job-creating infrastructure projects that will boost our economy.”
The National Association of Pension Funds (NAPF) has welcomed the consultation, but has called for the government to open a wider consultation on investment regulations.
Joanne Segars, chief executive at the NAPF, said: “Lifting this limit would remove one barrier, but there are wider issues that need to be addressed.
“The government needs to undertake a comprehensive review of the local authority pension fund investment regulations to ensure funds can act in the best interests of their members and council tax payers.
The consultation will close on 18 December 2012.