Insurers and other pension risk transfer (PRT) providers are “ready” to invest up to £190bn of pension money into UK infrastructure over the next decade, analysis by Legal & General (L&G) has found. This would plug almost a fifth of the UK’s infrastructure funding “mega-gap”, which, according to the firm, is likely to be as much as £1trn as regions across the UK “call out for greater investment to support our society’s needs”.

The report, The power of pensions: How pension savings can help to build the UK’s infrastructure and drive growth in all regions, highlighted investment in infrastructure as “key” to maintaining the long-term competitiveness of the UK economy. It added that it was also “vital” to delivering the government’s modern “industrial strategy”, and would bring the economic stimulation and employment opportunities so “desperately” needed amid the current crisis.

The group stated that whilst the Spring Budget recognised the need for further infrastructure investments across the UK through “significant spending plans”, government alone cannot fund these projects, especially in light of the Covid-19 crisis. However, insurers offering PRT, according to L&G, could help to close this infrastructure investment gap “significantly”, with an estimated £150bn to £190bn of investment expected from insurers and other PRT providers over the next decade.

L&G explained that the UK PRT market has de-risked more than £64bn over the last two years alone, emphasising that this represents only a small proportion of the estimated remaining £1.6bn in DB scheme assets. The Pensions Policy Institute (PPI) estimated that £770bn could come into play in the PRT market leading up to 2030. It added that long-term infrastructure investments are often “very attractive” to insurers thank to the security, and steady cash flow for paying pensions as they fall due, associated with them. Furthermore, the report noted that the cumulative size of the pension funds available allows insurers to diversify and spread any potential risk.

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