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John Armitt says pension schemes need to ‘find the best possible opportunity’

The UK government’s top infrastructure adviser has hit out at a drive to push pension schemes to invest more in Britain, saying there is “no reason” funds should have a home bias.

Sir John Armitt, chair of the National Infrastructure Commission, said tens of billions of pounds were needed from the private sector to meet infrastructure needs, including energy upgrades, new hospitals and roads.

But he added that it would not be right for pension funds to simply invest in home markets due to ministerial pressure.

“Government needs to recognise this as an international, globally competitive market,” he told attendees at the Trades Union Congress pension conference in London this week.

“Frankly, there’s no reason why any of the pension funds here should say ‘oh, I’ve got to invest in the UK’. You’re looking after your pensions and trying to find the best possible opportunity for them.”

Armitt’s comments will add to a growing backlash against proposals led by chancellor Jeremy Hunt for pension funds to significantly increase their investments in British business and projects to boost growth.

The government is concerned that pension funds, which have some of the nation’s largest pools of capital, are not putting enough money into home markets and depriving early-stage companies of seed finance.

Armitt is one of the most high-profile individuals to speak out against the proposals which were announced in the spring Budget and require pension funds to report how much they have allocated to the UK.

Pension trustees are concerned that the move could undermine their duty to invest in countries where they will secure the best returns for members.

“I am not sure that it is the role of the government to tell trustees where they place their money,” said Armitt.

He added that the government had to be prepared to “do deals” with private companies and pension funds to unlock capital for infrastructure, including more risk sharing.

The NIC provides ministers with independent advice on meeting long-term infrastructure challenges.

Armitt is also chair of the National Express Group and City and Guilds, deputy chair of the Berkeley Group and a member of the Board of Transport for London.

About half of the government’s current pipeline of infrastructure projects is expected to involve the private sector, the Treasury has said.

However, pension funds and other investors prefer to invest in assets that are already built or come with substantial government guarantees that minimise construction risks.

In his Budget, Hunt confirmed new measures that require local authority pension funds and private sector retirement plans to disclose their UK investments. He warned that he would review what further action should be taken if this did not lead to an increase in allocations.

At the same event, the Pensions and Lifetime Savings Association, which represents the UK’s £1tn pensions sector, said the government should not tell pension funds how to invest. “We must maintain the freedom for trustees to invest in the best interests of their members,” said Nigel Peaple, spokesperson for the PLSA.