Cambridgeshire County Council’s Pension Fund has invested £15m into shares in a local building society.
The fund has injected the capital into The Cambridge Building Society in return for core capital deferred shares, which gives it one vote at meetings.
In June 2012, the fund created a challenger bank, Cambridge & Counties Bank, in partnership with University of Cambridge’s Trinity Hall College.
Councillor Roger Hickford, chairman of the Cambridgeshire County Council Pension Fund, said the fund “welcomes the opportunity to invest in a long-established Cambridge-based business and in supporting local people in buying local homes. We applaud The Cambridge on this innovative share issue which will provide a stable and attractive investment return for our pension fund members.”
The new capital will support further growth of the business, lending more to local borrowers and investment in products and services for existing members, according to a statement from the building society.
The partners claim the move is the first deal of its kind between a building society and local authority in the UK.
Stephen Mitcham, chief executive of The Cambridge said: “The Cambridgeshire County Council Pension Fund is the ideal partner for The Cambridge as we share the vision of delivering long-term benefits for residents and the local economy.
“This synergy replicates the original founding of The Cambridge which was Cambridge people coming together to help themselves and others.”
Separately, annual returns submitted to Companies House show that Cambridge and Counties Bank made a pre-tax profit of £18.1m in 2016m, up from £8.1m in 2015.
Total income for 2016 was £28.7m, £10.1m higher than in 2014, reflecting a strong growth in lending.
Earlier this year Warrington Borough Council approved plans to invest £30m to create a joint venture challenger bank.
The authority’s executive board approved proposals to take a 33% share in the bank, which is aimed at boosting investment in small and medium sized businesses in the town and beyond.
Other councils, including Manchester City Council, Birmingham City Council and St Helens Council have set up mechanisms to directly lend to SMEs without applying for a banking license.