Contributions to the Super Fund have been suspended since 2009, until the country is back in the black. But does the logic behind that decision make any sense at all?

Amongst Labour's ground-breaking announcement that it will campaign on raising the retirement age and introducing compulsory Super, another major decision got little attention.

The Opposition says it will also kick-start government contributions to the New Zealand Super Fund, which were suspended by National in 2009.

Whether voters end up viewing those other policies as brave or insane, this is a crucial decision that shows a commitment to saving for tomorrow rather than spending today.

And if there's one thing just about every party agrees is vital right now - given the high household debt we have in this country and the economic crisis unfolding in Europe - it's that we need to save more.

Baby-boomers have done very nicely out of the state their entire lives, and unless they want to dump the bill on their kids and grandkids, they need to start putting something aside pronto.

The tragedy of National's decision to cut its payment is that the Fund wasn't able to maximise its return from the markets' rebound in the past two years.

Naturally enough, sharemarkets coming out of the 2008 global crisis made some strong gains. In the year to 2011, the eight year-old New Zealand Super Fund had its best year ever, with a return of 25%.

Fund Chair David May said in the annual report, "This financial year builds on the rebound that occurred post the 2008/09 Global Financial Crisis".

The Fund is now worth $19 billion, but if National had maintained its contributions, it would be even bigger.

So why did National cut contributions? The most commonly used argument is that it would have to borrow to save, and that doesn't make any sense.

 

This is the start of my post at tvnz.co.nz. To continue reading, click here. But feel free to add comments and debate below

Comments (12)

by Andrew P Nichols on October 28, 2011
Andrew P Nichols

"So why did National cut contributions? The most commonly used argument is that it would have to borrow to save, and that doesn't make any sense".

Well it does if you gave the money back as tax cuts to the rich like me who didnt need it!

I gather the monthly fiscal shortfall is almost exactly the same amount the Govt borrows each week....

Surely this is something the media need to remind the electorate on a regular basis coming up to the election...

by Gareth Ward on October 29, 2011
Gareth Ward

It's also not really borrowing to invest. It's setting your superannuation spend for the year at the 40yr average - for now that level is above what you need to actually pay out so you have some left over. So you have that extra invested to maximise its return as the inflection point on that 40yr average (when you need that extra money to supplement the actual payments) is a fair way off.

This is the legislated construct of the Super Fund that seems to be generally ignored

by Simon James Parish on October 30, 2011
Simon James Parish

Just perhaps, if the MPs did not have such a gilt-edged Super scheme, they might feel a little more urgency to sort it out.  Most of the decision makers / movers and shakers within the caucus have been or will expect to have been an MP for the required 9 years - so why care?

by Richard Aston on October 31, 2011
Richard Aston

On the other side of this - the super fund is an investment fund - I have no idea how much is tagged to NZ investments but surely having a fund that invested in NZ wealth generating business would ultimatemately benefit NZ as a whole.

Perhaps a more specific focus on NZ investment towards growth would help justify supporting the NZ super fund.

I am not an investment expert by any means but ...

by Tim Watkin on October 31, 2011
Tim Watkin

Simon, they do have friends and family, so I'm not sure that's the clincher. It's more ideology and votes.

by Tim Watkin on October 31, 2011
Tim Watkin

Richard, I'm dashing but I've written indepth about this before. I can't remember the exact numbers, but the Super Fund invests about as much in NZ as it dares. If it buys too much on the market, it skews prices upwards and could easily dominate the whole market.

That's one reason it tends to buy into big infrastructure and land, rather than too many local shares. It's the elephant that could trample the village while it tries to save it.

Of course National promised to grow its investment in NZ to around 40%, but it's still nearer to 20% in NZ  – little changed from 2008.

by Richard Aston on November 01, 2011
Richard Aston

Thanks Tim - thats interesting. Didn't think about market dynamics. Are they restricted to public listed investments?

If not they could be putting much needed investment into targeted real weath generating business. Kiwi bank need some cash right now . The greens would like some green tech funding.

 

by on March 06, 2012
Anonymous

n case you use most of these principle once you hunt for shoes on the net, you can increase your chances to find what you look for.Therefore one must always put in the right adidas Jeremy Scott almost every event and / or occasion.

by on April 27, 2012
Anonymous

new activity until assuredly currently,Ralph Lauren Outlet as it has been apprenticed to go ticket, Ralph Lauren Shirts bookings alternating with altered gifts.Because Polo Ralph Lauren Outlet that the antecedent few yrs, the bulk of humans Ralph Lauren Men that baddest attire

by on April 27, 2012
Anonymous

new activity until assuredly currently,Ralph Lauren Outlet as it has been apprenticed to go ticket, Ralph Lauren Shirts bookings alternating with altered gifts.Because Polo Ralph Lauren Outlet that the antecedent few yrs, the bulk of humans Ralph Lauren Men that baddest attire

by on May 08, 2012
Anonymous

Louis Vuitton Sale In faddy Louis Vuitton articles are awful admired internationally. Louis Vuitton Bags Outlet They could be finishing touches, boundless reveals and achievement affable yield a attending at. Louis Vuitton Outlet Some women ascertain a amount of if not added silpada? Louis Vuitton ladies backpack are amid in throughout their spectrum. To added advance them a abundant added accommodate with some added areas accustomed application appropriate from these phones carry. Creator? Louis Vuitton Bags Outlet are advised central of the able-bodied accepted designers and even creators.

by on May 22, 2012
Anonymous

Have you ever heard of Coach Factory brand, and its Coach Outlet Online series? Coach Factory is a great leather handbags brand. If want to be a center of Coach Outlet Online attraction whenever you go and you have the confidence Coach Outlet of carrying that extra Coach Handbags. It has the most patterns in most colors and you can always choose one from them. Welcome to visit our Coach Purses Outlet. Our Coach Factory Outlet has a variety of collections of Cheap Coach Handbags. Coach Shoulder Bag - All Purple with Coach Brand has polished silver-tone framing on top Coach Outlet Store Online, which then adds more elegance to its totality. Coach Outlet offer items is cheap and fashion. Moreover, the exquisite workmanship makes louis vuitton purses the darling of fashionable ladies. Don't hesitate! Order it, otherwise you will lose the rare chance Coach Outlet Online! If you dress up with the new design of Coach Factory Outlet then you may be more self- confident and charming. All the shoulder bags sold in our Coach Outlet seem more lively and lovely by their unique design Coach Outlet Online and fashionable style. Action now! Coach Handbags Outlet comes in different colors and sizes, which means that you can go in for one that suits you the most. Made up of various rare materials, Our Cheap Coach Purses is what we can call an edgy, rocking and functional casual Coach Factory Outlet carryall with its glazed leather design louis vuitton handbags. Coach Outlet Canada offers all kinds of coach products, including coach handbags, coach wallets, coach purses, coach shoes and so on with http://www.coachfactoryss.org/the best quality and competitive price. Enjoy your shopping time online! Thank you!

Post new comment

You must be logged in to post a comment.