Budget 09: Halt on Super input could put fund at risk - expert

The decision to stop contributing to the Superannuation Fund for up to 11 years could place its future in jeopardy, a retirement policy expert says.

The Government yesterday confirmed it would put contributions on hold for the $12.5 billion fund, set up in 2003 by the Labour Government to help pay for the future retirement costs of New Zealand's baby boomer generation.

Finance Minister Bill English said the Government would have had to borrow to pay the $1.5 billion due to go into the fund this year and it did not make sense to burden future generations with debt incurred financing investments intended to reduce the need to borrow.

He said the Government would start contributions again when its operating balance was sufficient to meet contributions and other capital spending.

"On current projections this will be from 2020/21, and will continue for a decade until withdrawals from the fund begin in around 2031."

Retirement Policy and Research Centre co-director Michael Littlewood was surprised by the length of the suspension and believed it could lead to the fund's closure.

"I think to talk about delaying it for 10 years may be the start of unwinding it."

Littlewood, who has never been a fan of the fund, said it was wise for the Government not to borrow to invest in the sharemarket. "If it's not right for households, then it's not right for the Government."

But he said the move also raised the question of whether the fund should be shut down and the money used to reduce borrowings to pay for essential spending.

"Why are they raising debt in order to finance other activities when they have this money sitting in the Cullen fund?"

Closing the fund was a logical extension, he said.

Jonathan Eriksen, an actuary who undertook a review of the fund in 2004, said if the contributions were put on hold for 11 years it would cast doubt on the future of the fund.

But he doubted that would happen.

"A short-term halt is correct.

"In our view it should have been for a two-year period - that is the immediate timeframe you can plan for in a Budget. We don't even know if [English] is going to be in power then."