Pension fund reclassification a threat

The Pensions and Lifetime Savings Association (PLSA) has claimed that proposals to reclassify local authority pension funds would threaten the ability of funds within the Local Government Pension Scheme (LGPS) to invest in infrastructure.

Responding to the FCA’s consultation, Markets in Financial Instruments Directive II, the PLSA warned that the majority of infrastructure investment firms are structured to explicitly exclude retail investors.

A recent survey, conducted by the PLSA, revealed that LGPS respondents reported that 1.1 per cent of their assets are invested in infrastructure, equating to approximately £2.7 million of at risk infrastructure when considered across the whole LGPS.

Graham Vidler, director of external affairs at PLSA, said: “Reclassifying local authority pension funds as retail investors will prevent them from investing in certain asset classes such as infrastructure. With LGPS funds investing billions in infrastructure right now, and at a time when the government is calling for greater infrastructure investment by pension funds, these proposals are counterintuitive.

“We urge the FCA to distinguish between the investment activity of local authorities and local authority pension funds, so the latter may retain its professional client status to continue its effective investment strategies.”