Super Fund’s 15th birthday a reminder of the need for intergenerational investments

Today’s celebration of the New Zealand Super Fund’s 15th anniversary is an opportunity to reflect on why the Fund was created, and why it was important that the Coalition Government resumed contributions, Finance Minister Grant Robertson says.

At an event in Parliament on Wednesday evening, Grant Robertson acknowledged the vision of the Super Fund’s creators, led by former Finance Minister Michael Cullen. He also acknowledged the Fund’s managers for their work generating world-leading returns on behalf of all New Zealanders.

“The Cullen Fund is an example of an intergenerational policy where the Government of the day chose to look past the short-term election cycle and actually put in place a structure to ensure future taxpayers were not unfairly burdened by costs they knew were coming,” Grant Robertson said.

“The Fund was set up to allow the Government to ‘save now’ to smooth the costs of an ageing population across generations. The contributions we are making, and the returns generated by the Fund’s investments, will help future Governments with the costs of providing universal super.

“The Super Fund commenced investing in 2003 with $2.4 billion in cash. As at 30 September 2018 it was worth $41 billion. Its independent managers have produced an average annual return of 10.44%. This is well above the ‘reference portfolio’ the Fund is marked against, meaning it has delivered $7.9 billion in additional value than if the initial capital had just been invested in a passive reference benchmark.

“It’s unfortunate that, despite the Fund’s success and the need to save to allow for universal super in the future, the previous Government made a political decision to stop contributing to the Fund, even once they had returned to surplus. The Fund itself has produced figures showing this short-term thinking has cost future taxpayers $24.1 billion.

“On coming into office, the Coalition Government resumed contributions within our first 100 days. It was a proud moment hitting the button to make the first payment alongside the Prime Minister back in December. Over five years, we are set to invest $7.7 billion. This, along with the Fund’s expected performance, mean it is now forecast to grow to a size of $64 billion by 2022/23.

“Our decision to resume contributions will not only benefit future generations by helping to cover the costs of an ageing population. Over the next few decades, the Fund’s independent managers are set to continue investing in New Zealand businesses and infrastructure projects which will drive productivity gains and economic growth, while providing decent returns for the Fund. These are long-term investments in our future,” Grant Robertson said.