Co-op's pension scheme responds to UK social housing crisis

20 November 2018

The Co-op announces today that its pension fund plans to invest up to £50 million into the social and affordable housing market over the next 12 months, providing needed support into a sector where demand is clearly outstripping supply.

Across the UK, there are an estimated 1.15 million households on waiting lists for social homes*. Many of these are key workers who exceed the income threshold to qualify for social housing, but struggle to afford to buy their own home.

It is thought that around 100,000 new social homes are needed each year to support the demand. The annual delivery of homes, however, has been just half of this figure**, and despite the increased size of the population, the amount of social housing stock has reduced considerably over the past 35 years.

PGIM Real Estate has been appointed to develop the portfolio as part of its inflation-linked property holdings. An initial investment in 50 units at the Fair Acres development, in Dunbar, Scotland, is being made, which upon completion, will be let to East Lothian Council. In addition, PGIM Real Estate has secured 48 units in Glasgow and 71 units in Yorkshire, and are actively pursuing developments across the UK. The £50 million investment will eventually provide 350 units.

The investment provides attractive, secure inflation linked income to the pension scheme, meeting the needs of both members and the scheme sponsor, and is aligned with the Co-op’s commitment to seek new ways to serve its members and their communities as part of its “Stronger Co-op, Stronger Communities” pledge.

Separately, the Co-op will maintain its focus on issues that it feels are impacting communities and, owing to its unique ownership model and flexible approach, choose where it invests going forwards. As part of these initiatives, the Co-op’s community fund, raised by its members, has paid out £19m to 4,000 local causes so far in 2018.

Commenting on the decision, Allan Leighton, Co-op Chair said:

“The decision by the PACE trustees to invest in the Social Housing sector illustrates the strength of the pension scheme and a positive will to invest in an area clearly in need of support. If this approach could be adopted more broadly across the pension fund industry, then the current supply gap could be narrowed much more swiftly and effectively.”

The Co-op is clearly making a sustainable and distinct difference that will help communities across the UK. I’m sure that Co-op colleagues, both past and present, will be heartened to know that a portion of their pension assets are being invested in this way. “

Harry Baines, Chairman of the Board of the Corporate Trustee of the PACE Pension Scheme, added:

“Our investment strategy aims to meet the needs of our scheme’s members, but in a way that is aligned with the Co-op’s values. This move to funding social housing developments as part of our property portfolio aligns with our Responsible Investment Policy which was developed with the Co-op and our members.

This funding provides a safe and secure investment opportunity for PACE that will benefit our members and at the same time is meeting a clear social need in the UK housing sector today.”

Ends

Notes to Editors

About the Co-op:
The Co-op is one of the world’s largest consumer co-operatives with interests across food, funerals, insurance, legal services and an online electrical store. It has a clear purpose of championing a better way of doing business for you and your communities. Owned by millions of UK consumers, the Co-op operates 2,600 food stores, over 1,000 funeral homes and it provides products to over 5,100 other stores, including those run by independent co-operative societies and through its wholesale business, Nisa Retail Limited. It has more than 63,000 colleagues and an annual revenue of £9.5bn.

About PACE:
PACE DB was set up in April 2006, when three Co-op defined benefit (DB) pension schemes merged: CIS Employees’ Pension Scheme, The Co-operative Bank Pension Scheme and Co-operative Group (CWS) Limited Pension Scheme. It also incorporates a number of pension schemes from other co-operatives and companies who merged with the Co-op.

About PGIM Real Estate:
PGIM Real Estate is the real estate investment business of PGIM, the global investment management businesses of Prudential Financial, Inc. (NYSE: PRU). Redefining the real estate investing landscape since 1970, PGIM Real Estate has professionals in 17 cities in the Americas, Europe and Asia Pacific with deep local knowledge and expertise, and gross assets under management of $69.2 billion ($49.5 billion net) as of June 30, 2018. PGIM Real Estate’s tenured team offers to its global client base a broad range of real estate equity, debt and securities investment strategies that span the risk/return spectrum. For more information, visit pgimrealestate.com.

Shelter’s analysis shows there are 1.15m households on waiting lists, but only 290,000 social homes were made available last year – a difference of more than 800,000 homes.
* Shelter