Inside Money: How to make bread with KiwiSaver

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After reading my blog last year revealing the secretive Exclusive Brethren were behind the BCF KiwiSaver scheme, my friend Richard wanted in.

"I reckon they know how to make money," he said.

However, barring a (most unlikely) religious conversion Richard will, sadly, not be able to switch his retirement savings into the BCF KiwiSaver scheme.

In its prospectus, released just before Christmas, the BCF scheme made it clear that membership would be - no surprises here - exclusive: sorry Richard, this one's for the bros only.

But as I mentioned in my previous blog I was more curious about how this intensely private religious organisation would marry its philosophical beliefs with a public investment strategy. The answer is as quirky as you might imagine.

Firstly, the BCF prospectus sets out rules for creating two investment vehicles - the 'Main Pool' and the 'Segregated Pool'.

"The Segregated Pool will only be established in the event that any member of the Scheme ceases to break bread with the Brethren Christian Fellowship," the prospectus says.

Furthermore the Segregated Pool will only invest into cash at a NZ bank or banks, which, until sufficient funds build up, is also how the Main Pool will operate.

Even placing money in a bank, though, rankles with BCF sensibilities, which has a general policy that "the assets of the scheme can only be pooled with investments of other [BCF] members".

In a concession to financial reality the BCF will also allow a comingling of its assets with non-believers in a limited range of other investments, namely, New Zealand central and local government debt.

However, the mixing stops there with the BCF prospectus specifically excluding investments in shares listed on public stock exchanges and interests in any pooled vehicle whose members are not entirely Brethren.

So far that's not much of an investment strategy - cash plus a few loans to the NZ government and local councils is hardly going to keep many Brethren in retirement.

The BCF's ultimate goal for its KiwiSaver scheme, though, is revealed in its list of "other permitted investments", namely "businesses owned by [BCF] members... and mortgages issued to [BCF] members".

I can't decide whether this is a brilliant and innovative interpretation of the KiwiSaver rules or to be outraged that the BCF will be able use taxpayer subsidised funds to provide cheap capital to its businesses and easy home loans to fellow Brethren.

I'll ask Richard.