Calls for Scottish public sector pension funds to be merged into giant £42 billion body

The move, which would create a fund of more than £42 billion for over 400,000 workers, could transform the way public projects are funded.

Unison, leading the charge, believes such a dramatic move would slash tens of millions of what it called hidden private costs and unlock job-creating investments.

The SNP is understood to have an open mind on whether to merge funds but is openly eager to entice more cash for new schools, roads, hospitals and homes from pension funds still largely locked in to UK and global financial markets.

In England and Wales, funds have been ordered to pool their resources as ministers urged them to invest a 10th of their money in to infrastructure. Just matching that number in Scotland would have a transformational effect on the Scottish economy, say supporters of a merger or further collaborations.

Unison has the backing of some of the funds themselves with Lothian, the second biggest suggesting a merger could save £70m a year in fees.

The Edinburgh-administered fund - which is the only one which does most of its work in-house - said its model was better than those who get private firms to do their investment legwork.

It said: “Investment is a scale business so costs would be lower. There would be an increased set of investment opportunities and greater influence over the terms of investment.”

However, Scotland’s biggest pension firm, Strathclyde, has suggested a merger just to enable infrastructure projects would be ‘perverse’ while its smallest, Orkney, suggests it could be a “hugely costly mistake’. Both Strathclyde and Orkney warn a national merger could break the link between councils and they funds in to which they pay.

Some politicians - and Unison - believe a single fund would refocus on cleaner and more ethical investments.

Ross Greer, the Green MSP and vocal critic of pension funds, said: “The proposals spearheaded by Unison, to merge the eleven existing funds into a single national system with much stronger environmental and social considerations in its governance is worth considering.

“Their argument that a single national fund would be subject to much more scrutiny and more likely to clean up its investments is compelling.

But it’s not without issues of its own. The existing funds do have an element of democratic governance, with elected councillors and trade union representatives on their boards.”

Unison, in a formal statement, acknowledged that the funds - all of which have more money than they need to cover their liabilities - were already in good shape. But it said that meant this was a good time to reform.But it said: “Scale gives greater investment clout, tackles fee transparency, enables in-house expertise to invest in new areas like infrastructure and reduces duplication and cost.

“Change is always difficult and there are significant vested interests who will oppose change. Pensions are one of our members most important benefits and they need to be protected, not just today, but in the long-term. This may appear to be radical reform, but in the worldwide pensions sector, it will be seen as common sense.”

A spokeswoman for Scottish Public Pensions Agency, which both oversees some funds, such as those for teachers and NHS staff and advises ministers on pension policy, suggested options were open.

She said: “We are hopeful that there will be opportunities for greater investment in Scotland’s infrastructure and we await the outcome of the scheme advisory board’s consultation, which we will consider and provide further comment at the appropriate time.”

A spokesman for Cosla, which represents council employers, did not express a position. He stressed there were several options under consideration. He said: “There is no local government pension scheme merger proposed. All that’s happening is a consultation on structure options is taking place. COSLA has responded but we don’t have anything further to say at this stage.”