Union bosses have warned against the chancellor's plans to encourage council pension funds to invest in British infrastructure, calling them too risky without government guarantees.
In his conference speech on Monday, George Osborne announced plans to merge 89 local government pension funds into six regional British Wealth funds to increase investment in infrastructure.
However, leading union GMB warned that council workers’ pensions should be invested as ‘efficiently as possible’.
Brian Strutton, GMB national secretary, said: ‘Combining council workers' pension funds will not lead to more investment in UK infrastructure unless government underwrites the rate of return available.
He suggested that the only reason more of the Local Government Pension Scheme (LGPS) assets are not invested in infrastructure 'is because the risk outweighs the returns'.
‘Mr Osborne needs to remember these are council workers' pension savings that need to be invested as efficiently as possible, they are not to be used as politician’s playthings.’
However the Treasury argues that the small local pension funds 'lack the expertise to invest in infrastructure'.
'Overall, across £180bn of assets, only 0.5% is invested in such projects. In countries with larger pooled public pension funds up to 8% of assets are infrastructure and 17% are housing and infrastructure,' Treasury officials said.
Unison have also warned that pension fund investment should be done to get the best return for local government staff, adding that the costs of pooling the funds must be fully transparent and investment decisions should include members.
Unison general secretary, Dave Prentis, said: 'The chancellor shouldn’t use our pension funds as a convenient way of making up for the infrastructure investment that no longer happens. Nor should they be used as replacement capital for the Government’s privatisation programmes.
'PFI has been a disaster for both the pension funds investing in it and the public authorities who are now having to pick up the costs. Yet another abuse of our members’ pension funds cannot be allowed to happen.'
