Pension savings ‘could help to boost economy’

PENSION SAVINGS could help to plug gaps in the UK’s infrastructure and boost the recovery of the economy, a report suggests.

Legal & General said regions across the UK are calling out for investment in transport, homes and energy, to bring infrastructure up to where it needs to be to support society’s needs.

This regional activity would also help unleash the economic stimulation and employment opportunities that the UK desperately needs as it looks to recover and rebuild following the impact of Covid-19, it argued.

The infrastructure investment gap over the next 10 years could reach £1 trillion, according to Legal & General’s estimates. But it argued that insurers could potentially help to plug some of the “mega gap”.

It estimates that between £150bn and £190bn could be invested in infrastructure by insurers and other providers. Insurers could help fill the gap through pension risk transfer (PRT) schemes, it argued.

PRT happens when an insurer takes on a company’s defined benefit (DB) or final salary pension scheme, including assets, liabilities and risks, from trustees. It then commits to paying pensions as agreed.

The insurer then invests the pension scheme’s funds into assets that should deliver returns in the long term – so that it can pay out on its pension promises.

Legal & General said longterm infrastructure investments are often attractive to insurance companies because they can provide secure and steady cash flows for paying pensions.