Pensions prefund plans pass un-noticed
Plans to partially prefund a portion of future state pension costs is one of the New Zealand government's most important and far-reaching policies, yet it is receiving little debate.
The plan is that each year the government will squirrel away about $2 billion of its revenue and this money which will be managed by an independent board. At its peak in 2010, the fund is estimated to reach about $26 billion.
The proposal ties future Governments to spending commitments, it places pension payments above other social welfare costs, such as education and housing, and it does nothing to lower the cost of the state's big ticket spending item NZ Super. Despite all this, less than 30 substantive submissions were made on the bill.
The first of those submissions was heard by the Finance and Expenditure Select Committee in Auckland a fortnight ago.
One of the bill's fiercest critics, Michael Littlewood, who was a member of a previous Government taskforce on superannuation, labels the proposal as crazy.
He says the fund is a "facile, political fix".
At best it will make a relatively minor contribution to a partial inter-generational smoothing of the government's cash flows, he says. At worst, it will constrain growth, increase risk, reduce saving and provide governments and New Zealanders with an enormous distraction to the real issues that we should all be debating.
Meanwhile the Government has admitted that the bill won't be passed through Parliament in time for its proposed July 1 start date.
Because the bill won't be passed transitional arrangements are being made for managing the money. Under these arrangements the Treasury's Debt Management Office will look after the funds.
The Government plans to put $600 million into the fund in its first fiscal year.
Recommended for you
The new financial year has got off to a strong start in adviser gains, helped by new entrants, after heavy losses sustained in June.
Michael McCorry, chief investment officer at BlackRock Australia, has detailed how investors are reconsidering their 60/40 portfolios as macro uncertainty highlight the benefits of liquid alternatives.
Having reset its market focus to high-net-worth advisers, Praemium’s administration solution has been selected by Bell Potter in a deal that increases the platform's funds under administration by $6 billion.
High transition rates from financial advisers have helped Netwealth’s funds under administration rise by $3.7 billion in the fourth quarter of FY25.
