KiwiSaver funds bankroll community housing

Generate and Caresaver KiwiSaver are backing a community housing initiative seeking to raise $100 million in funding for as many as 300 low-cost houses, much of it to be built on unused urban church land.

Community Finance said it had reached the halfway stage of its Aotearoa Pledge targets, with cornerstone commitments of $10m each from the two KiwiSaver providers and ANZ Bank, while Forsyth Barr, Lindsay Foundation and WEL Energy Trust have contributed a combined $11m.

Chief executive James Palmer said the platform, established in 2019 with the backing of the Lindsay Foundation, the Tindall Foundation, the Matua Foundation and Christian Savings, was hoping to see other fund managers, community foundations and businesses "step up this year".

Its latest campaign follows the successful launch of its Salvation Army community bond last year, which raised $40m for the construction of 118 mixed-use homes in Royal Oak, Westgate and Flat Bush, near Auckland.

While that effort comes in at about $339,000 per house, it is known the Salvation Army contributed significantly on top of the funds borrowed from Community Finance.

The return for Generate, which bought $20m worth of those bonds, is 2.3% per annum. Community Finance said it typically charges less than 0.65% to manage the investments, lending and impact reporting.

Palmer said the model is "an efficient and robust solution for financing large scale affordable housing developments and is proven to deliver".

Community Finance said it has $1b in community housing projects on its books across Otago, Canterbury, Wellington, Hawke's Bay and Auckland.

It hasn't confirmed any of the new sites under the latest scheme, outside of several sites in the Waikato, under the WEL community bond investment.

Economist and Community Finance director Shamubeel Eaqub said it was exciting to see private capital in the pledge, as "the housing crisis is too big to be solved by philanthropic funds alone".

"When we can unleash the investments of ordinary New Zealanders, to the benefit of housing New Zealanders, we can move the dial.” 

Responsible investment’s gender gap

Women are 10% more likely than men to switch KiwiSaver providers if their funds are invested in industries they do not support, a new survey shows.

The research from Mercer found that nearly 75% of members said access to responsible investment was an important feature of the scheme.

“Investment performance is top of mind for investors across the market, however we found that a growing number of members also want their money invested responsibly and in line with their personal value. Women in particular are more likely to rate access to RI options as one of their top five important features when compared to men” said Sarah Whitelock, consumer wealth leader, Mercer New Zealand.

“Across the board we see women express significantly higher levels of concern about where their funds are invested than men. So much so that women are more likely to switch KiwiSaver providers if their funds are invested in industries they do not support, suggesting investments need to align with their beliefs. Further to that, just over one in five (22%) women are more likely to disagree that their KiwiSaver provider offers a sufficient number of RI options, which tells us there is an opportunity for providers to more clearly demonstrate and communicate their commitment to RI.”

She said the research showed that funds that were invested in a way that targeted responsible or sustainable outcomes did not come at the cost of performance.

Mercer found that KiwiSaver members were most frequently concerned about investments in weapons, pornography, gambling and tobacco. Women were 16% more concerned than men about where their funds were invested, on average. One in five women said their KiwiSaver provider did not offer a sufficient number of responsible investment options.

Women rated communication material as the most important feature of a KiwiSaver scheme, followed by investment performance, while men rated investment performance first, followed by fees.

Adviser calls to ditch default schemes

New Zealand may not need KiwiSaver default schemes at all, one adviser says.

The Government is working through the process of appointing default providers for the next term.

There are nine default KiwiSaver providers, and their terms of appointment expire on June 30. About 715,000 people are in default funds and more than half have not made the choice to be there.

Being a default scheme is understood to give providers a reputational boost, but it comes with increased scrutiny and regulatory restrictions, particularly on the fees that can be charged.

But Clive Fernandes, an AFA who specialises in digital advice, said the idea of default schemes had passed its use-by date.

He said the review of default provider settings ahead of the appointment process had focused on the wrong thing.

“The KiwiSaver default scheme concept was required when three million Kiwis needed to be onboarded as KiwiSaver members in a short period of time,” he said.

“However, the situation has now changed significantly. Now that most Kiwis are already signed up to KiwiSaver and new signup numbers each year are lower, the 'default scheme' idea is no longer required.

“Instead, people should be given access to personalised advice right as they are signing up. We should be encouraging new entrants to make an active choice to best set them up for their future and specific goals. This would help to solve a lot of issues and would be in the best interests of members vs providers,” he said.