Britain plans to tap pension funds to provide the lion's share of a 25 billion pound investment in infrastructure projects as it seeks to revitalise a stagnant economy, Treasury Minister Danny Alexander said on Monday.

The plans are the latest in a drip feed of government announcements ahead of Chancellor George Osborne's autumn statement on Tuesday when lower growth forecasts are set to be announced as the euro zone crisis bites.

Osborne announced measures on Sunday to underwrite 20 billion pounds of loans to smaller companies which are struggling to get credit.

Alexander said that the government would reallocate 5 billion pounds of spending to capital projects by 2015 but crucially added that a deficit-cutting coalition would not borrow any more.

Through working with British pension funds, we're identifying ways to unlock around 20 billion pounds of pension fund investment to go into privately funded infrastructure, Alexander told BBC Radio 4.

Pension funds are looking to ensure better returns after yields on British government bonds or gilts fell following buying by the Bank of England and by investors seeking a haven from euro zone turmoil.

Britain's plans got a boost on Monday when the head of China's sovereign wealth fund said the country was keen to invest in the ailing infrastructure of Western countries, especially Britain.

($1 = 0.6458 British pounds)

(Reporting by Stefano Ambrogi and Keith Weir; editing by Anna Willard)