A British Union Jack flag flies on the Bank of England building in London. | REUTERS

LONDON – Local government pension plans ⁠managing assets totaling some 400 billion pounds ($541 billion) are among Britain's biggest investors in nonbank "shadow lending" funds, a sector the Bank of England (BOE) recently flagged concerns over.

Almost half these plans in England and Wales have invested 10% or more of their assets in such funds, an analysis shows, exposing the pensions of staff from classroom assistants to refuse collectors to swings in what are still opaque markets.

The high and steady returns of nonbank lending in the decade to 2024 made it an attractive option for managers of such plans, which guarantee members a final ​salary-linked pension.…