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Source: ONE News -
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The government is suspending automatic contributions to the New Zealand Superannuation Fund until there are sufficient budget surpluses to fund contributions.
Finance Minister Bill English says the government remains committed to maintaining National Superannuation entitlements at 66% of the average wage to be paid from age 65.
But he has confirmed that automatic contributions to the fund will be suspended until at least 2020-2021. He says the government would have had to borrow up to $2 billion a year to maintain contributions and it makes little sense to burden future generations with that debt.
English says the moves secure superannuation entitlements into the future and not taking steps to control debt would leave the country with budget deficits until the mid 2020s. 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 to help the fund meet the government's policy of investing 40% of its assets in New Zealand. It is considering whether to make further partial contributions each year.
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 but the main reason for suspending automatic contributions is that it would require heavy borrowing.
Political hot potato
Labour leader Phil Goff has dismissed the Budget as dishonest, saying the public only expected a two year suspension on contributions to the fund. He says National has broken the cross-party accord on superannuation and is selling short future generations.
He says National has gutted the funding of superannuation and baby boomers will have to bludge off generation X and Y because by time they come to retire there will be no funding to guarantee the entitlements.
Political analyst Therese Arsenau says the length of the deferment of payments makes national politically vulnerable. She says Bill English has never been a fan of the superfund and the move could leave him open to accusations of using the recession for political expediency.
Arsenau says National believes it doesn't make sense to borrow money now to put into the fund and the country is better off keeping debt low and growing the economy. But she says super really does matter to people, especially with a "baby boomer bubble" coming through. Arsenau says these people have had money invested at a time when they are not getting the same rate of return and many have lost money through finance companies going broke.
And Arsenau says National needs to remember older people are an important demographic for the party which is going to have to sell the message very clearly that it is trying to preserve super payments in the long term.
Economist Sharon Zollner says the suspension of the super payments makes perfect economic sense and it is a question of accounting. She says if anything this should save money over time and Labour may well have ended up with a similar budget at this very difficult time.
But Berl economist Ganesh Nana was surprised at the length of the deferment. He says to openly admit we are going to defer payments for 10 years is sending all the wrong signals about the importance of saving. Nana says part of the government's spending programme has got to be some savings talking and we are not going to pay off debt unless some savings are made out of our current income.
