Plans to further consolidate the Local Government Pension Scheme (LGPS) could 'unlock' more than £200bn in private investment in infrastructure and help crowd in "huge" sums from private investors, analysis from Pension Insurance Corporation (PIC) has revealed.

The research, shared ahead of Chancellor, Rachel Reeves', inaugural Mansion House speech, showed how UK local pensions can become a major driver of investment in the UK, outlining a number of key recommendations for the new government,

In particular, the report recommended that LGPS pools become major equity sponsors of infrastructure projects, investing and managing projects to give private investors the confidence to invest, suggesting that this equity sponsorship role could crowd in £3 in private investment for every £1 invested by LGPS.

The report also highlighed the need for further consoldaiton, pointing out that, after almost a decade of trying to persuade local schemes to pool their assets in larger funds, progress has been limited, with the £392bn in LGPS assets currently controlled by 86 small funds.

This fragmentation, according to PIC, leads to excessive spending on fund managers and advisors and prevents large-scale investment in productive assets.

Given this, PIC encouraged the government to force the creation of a small number of global-scale LGPS pools with at least £100bn in assets, estimating that a £100bn pool might invest £14bn in infrastructure.

The group's analysis showed that that, if investment crowded in private capital at a 1:3 ratio, each £100bn pool would effectively deliver £56bn of infrastructure investment, including £14bn of directly invested LGPS equity plus £42bn of private capital crowded in.

PIC CEO, Tracy Blackwell, commented: “LGPS assets could and should be invested more in UK infrastructure projects. That isn’t happening because the LGPS is hugely fragmented.

"World-class infrastructure investors have at least £100bn in assets, first-class in-house investment teams, and governance structures that allow them to invest for long-term returns in productive assets like infrastructure and housing. The LGPS could and should have the same.

“With this scale, the LGPS pools could take on equity sponsorship of UK infrastructure projects crowding in billions of pounds of private investment into British infrastructure and housing, boosting growth and creating significant social value.

"This would be good for the economy, good for taxpayers and good for communities.”

However, industry experts have also urged Reeves not to overlook defined benefit (DB) pension schemes in her upcoming Mansion House speech, arguing that she should use the speech as an opportunity to provide "much needed clarity" on DB surplus sharing options.

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