New Zealand Super Fund - fact sheet

  • Bill English
Budget 2009 Finance

The Government is committed to maintaining National Superannuation entitlements at 66 per cent of the average wage, to be paid from age 65.

  • Far from putting entitlements at risk, the combination of measures we have taken in this Budget secures superannuation entitlements into the future.
  • The Government has decided to suspend automatic contributions to the New Zealand Superannuation Fund to avoid further increasing debt.
  • Changes to the Super Fund do not affect entitlements. This was explicitly stated when the previous Government set it up.
  • Not taking steps to control debt would leave us in the mid 2020s with budget deficits, a high level of debt and high borrowing costs. This situation would call into question the affordability of National Superannuation entitlements.
  • The suspension of automatic contributions will remain until there are budget surpluses sufficient to fund contributions. Under current projections, the Government is not expected to have sufficient surpluses for the next 11 years.
  • The Government will make a partial contribution of $250 million to the New Zealand Superannuation Fund in 2009/10. 
  • This will help the Fund meet the Government’s policy of investing 40 per cent of its assets in New Zealand. The Government will consider whether to make further partial contributions each year.
  • When the Fund was established in 2001, the Government said it intended to make contributions from available surpluses. It also noted that if surpluses were insufficient, contributions could be reduced or suspended. 
  • If we were to continue making automatic contributions, this would add $19.5 billion to debt over the next 11 years, with interest accruing on top of that.
  • Given the uncertainty and volatility in financial markets, the Government needs to take a cautious approach to additional investment, especially when this investment is funded by debt.
  • The Fund's investment returns for the nine months to the end of March are $5.5 billion lower than forecast in October last year. However the main reason for suspending automatic contributions is that it would require heavy borrowing, rather than the Fund's performance in the current environment.
  • The Government is keeping the fund and its assets. If market conditions improve, those assets will increase in value.
  • Once surpluses sufficient to cover automatic contributions return, the Government intends to contribute the amount required by the Fund formula.
  • The required contribution will be higher than it would have been without suspending contributions, because of the Fund’s smaller size. The post-suspension contributions will average $2.5 billion a year for the first five years, compared with a pre-suspension average of $2.2 billion a year over the last five years.