Insurers can tackle a fifth of the UK’s infrastructure funding gap over the next decade and encourage ‘inclusive capitalism’, according to a new report by Legal & General
Legal & General Retirement Institutional has determined a way to plug a fifth of the UK’s infrastructure funding gap over the next decade, by tackling one of the ‘mega-gaps’ the UK faces over the next ten years.
Legal & General has launched a report entitled ‘The power of pensions: How pension savings can help to build the UK’s infrastructure and drive growth in all regions’, which focuses on how Legal & General and other insurers can tackle the UK’s infrastructure gap and encourage ‘inclusive capitalism’ that improves everyone’s lives.
Investment in infrastructure is key to maintaining the long-term competitiveness of the UK economy and is vital to delivering the government’s modern Industrial Strategy.
The UK’s infrastructure investment gap over the next ten years is likely to be £1tn, according to the report. Regions across the UK are calling out for investment in transport, homes and energy in order to bring infrastructure up to where it needs to be to support our society’s needs.
This regional activity will also bring the economic stimulation and employment opportunities that the UK desperately needs as it looks to recover and rebuild following the impact of Covid-19.
Legal & General’s report looks at how insurers, through Pension Risk Transfer (PRT), can help to fill this infrastructure investment gap.
‘Make inclusive capitalism a reality’
Nigel Wilson, CEO of Legal & General group, said: “In order to have a strong and competitive economy on the world stage, the UK needs to invest a significant sum into improving its infrastructure and levelling up all regions.
“Long term investors like Legal & General have an important role in delivering regeneration, housing, transport and renewable energy investment by harnessing the ‘power of pensions’.
“We believe this is an important way to make inclusive capitalism a reality, investing for good whilst securing pension payments for millions of people.”
Pension Risk Transfer
Pension Risk Transfer is where an insurer takes on a company’s Defined Benefit or final salary (DB) pension scheme, including its associated assets and liabilities – and its associated risks – from the trustees and commits to paying members’ pensions as agreed, through bulk annuities.
The insurer will invest the pension scheme’s funds into assets that will deliver returns in the long-term, ensuring it is able to pay policyholders all they have been promised in retirement.
Across its business, Legal & General teams have so far invested £26bn pension savings in urban regeneration, clean and low cost energy, housing and transport links.
In recent years, the PRT market has been growing due to a combination of low interest rates, increased life expectancy and regulatory change – and this trend is set to continue.
Laura Mason, CEO, Legal & General Retirement Institutional, added: “By working with other insurers, we can use pensions savings to help plug part of the UK’s £1tn infrastructure gap, secure customers’ pensions and encourage the economic recovery.
“As an insurer, we have an important role to play by deploying pension funds to create a virtuous circle where older UK savers are funding infrastructure investments – creating jobs, homes and roads for other generations.”