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.
