The NatWest Pension Trustee Limited, the defined benefit (DB) pension scheme of NatWest Group, has joined forces with Legal & General (L&G) in a 15-year joint venture that will see £500m (€585m) invested in building “later living communities” in the UK.

L&G announced that Inspired Villages will develop and operate the project that will see build approximately 5,100 homes, aiming to deliver net-zero carbon later living communities across the UK to meet the fast-growing need for this specialist accommodation.

“With an ageing society, we will soon have more people over 65 than under 18 but do not have the infrastructure, health-spend or social care to support this long-term demographic shift, exacerbated by a shortage of suitable later living options,” L&G stated.

There are now more than 12 million over 65s in the UK with this figure expected to increase by 41% to nearly 18 million by 2040, L&G said. However, there are currently only 78,000 later living homes in the UK and only around 7,000 new units delivered each year.

The UK later living sector lags significantly behind international comparisons, accounting for only 0.6% of over-65s living in later living communities in contrast to around 5% to 6% in the US, New Zealand and Australia, it added.

As part of the new joint venture, L&G has sold a 50% stake in Inspired Villages’ first 11 sites to NatWest’s pension fund based on an enterprise value of more than £300m, allowing it to reinvest equity back into this fast-growing business and support its future pipeline.

Inspired Villages currently has six operational villages with 919 residents and four sites under construction. With a commitment to back a portfolio of 34 sites – equating to around 5,100 homes, 8,000 residents and an estimated gross development value (GDV) of c.£4bn – it enables Inspired Villages’ to scale its impact in addressing the considerable shortage of appropriate housing for older people in the UK.

The pension fund has also committed to acquiring all the developed fully-occupied villages outright, placing them into an operational fund. The developed villages will continue to be managed by Inspired Villages to provide ongoing resident services.

This has the potential over time to create an investment platform that allows other pension funds to access and invest in the sector via mature assets, allowing UK pension money to be deployed at scale in order to match long-term liabilities and back great outcomes for later living and UK society, L&G said.

Robert Waugh, the scheme’s chief executive officer, said: “The investment potential of the later living sector is substantial as the need to support our ageing population increases. This new partnership with Legal & General and Inspired Villages aligns perfectly with our ambitions to invest in areas that present strong social and environment credentials, whilst offering a good match for our long-dated liabilities.”

Laura Mason, CEO of Legal & General Capital, added: “This transaction is unique as it sees one of the largest UK pension funds investing directly into UK private social infrastructure. Broadening the range of growth assets that pension money can access is an important step forward for the UK’s growth agenda and economic future, allowing our country’s savings to support the UK in building back better, address climate change and tackle the major issues society is facing. We hope to see further deals like this follow.”

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