How many new homes can local pension pots fund?

Early last year I met a guy who proudly told me he’d soon be able to retire. He’d self-invested all of his pension pot in Apple shares and watched their value grow and grow. He was planning a decadent old age, with lots or travel, red wine and fast cars. It’s how many baby boomers imagine old age will be.

I’ve not seen him lately, but Apple shares have dropped a third in value and so too has his pension fund. ‘Tough.’ I hear you say, but where is your pension invested? You probably don’t entirely know where it is. I certainly don’t. My pension adviser talks enthusiastically about the various funds he feels can do great things for my pension. But apart from insisting on no tobacco, arms or users of third world slave labour I simply go along with what he suggests. Yes it’s important, but it’s also numbingly boring.

It’s by boring us with figures, forecasts and predictions that pension fund managers keep individuals like me and scheme trustees at arm’s length. Because stock market investment is by its very nature speculative, the professionals conceal the uncertainty behind acres of small print, spidery performance graphs and financial services jargon. We don’t want to appear ignorant, so we nod benignly and follow the advice. ‘Sign here, here and here,’ they say, so we do because the alternative is too painful to contemplate.

So I don’t blame trustees of the various Local Government Pension Schemes for their cautious approach. In their shoes, I’d play it safe too, or at least I would have until now. You see right now there’s a safe, reliable, familiar investment opportunity that will excite all but the most cynical fund trustee. It will also excite those saving for or living on their local government pension. Just as Apple has turned sour, this one is a peach, sweet and appealing.

Think for a moment about whose pension pot we’re talking about. You might not always agree with local government officers, but you have to respect the work they do. They spend their working day wrestling with three big challenges. The need for services is growing, the cash to provide services is declining and local politicians often meddle to make a political point. It’s the council officers too often left holding the baby, sometimes literally!

But soon, if the current period of consultation into local government pension scheme investment bears fruit, pension fund trustees will soon be able to up the amount of their portfolio they can invest in infrastructure and social housing from 15% to 30%. It’s been calculated that between them, these pension funds could pay for 300,000 new homes.

That’s what Britain needs right now, for three good reasons. One, waiting lists for social housing are way too long. Two, there’s a strong argument that says building more homes will tip us out of the current recession rollercoaster; and three, more new homes to rent will stop the rent inflation that is lining the pockets of greedy private buy to let landlords and crippling youngsters unable to save the deposit to buy their first home.

But what I don’t understand is why those very local government officers and pensioners aren’t lobbying their pension funds to invest in social housing. They understand the need better than almost anyone. They must also know that the way housing associations structure their debt, these are safe investments that will deliver the return they promise.

But the most compelling argument for investing pension cash in social housing is an emotional one. It’s surely going to delight everyone involved to be able to see the houses their pension has built. To know that the rent is in part going to fund their retirement and to see people in their own locality get the homes they need.

Apple turned sour and investment advice is largely rhubarb. Time I think for everyone to stand demanding pears – well, not fruit pears, but pairs of houses everywhere their local government pension pot can afford.