Super Fund board welcomes restart of Government contributions

At the projected peak of withdrawals from the NZ Super Fund in 2078 it wil be covering 12.8 per cent of the country's net superannuation bill. Picture / Kenny Rodger

The Board of the Guardians of New Zealand Superannuation has welcomed the resumption of Government contributions to the $37 billion fund.

The Government plans to put $7.7b into the NZ Super Fund between now and June 2022, with the first payment tomorrow. Contributions to the Fund were suspended in July 2009.

The cost of providing universal superannuation in New Zealand is rising due to an increasing proportion of older people in the population, the board said.

Mini Budget at a glance
• $41.7 billion capital spend over the next five years
• $7.7 billion of contributions to the New Zealand Superannuation Fund
• $6.7 billion for New Zealand Transport Agency for the national road network
• $4 billion to education for physical assets
• $2 billion over the next three years to kick off the KiwiBuild programme
• $1 billion provincial growth fund

The NZ Super Fund, which invested globally, was a way for the Government to save to help pay superannuation costs in the future. It would smooth the cost of superannuation between today's taxpayers and future generations, it said.

At the projected peak of withdrawals from the NZ Super Fund in 2078 it would be covering 12.8 per cent of the country's net superannuation bill. The projected tax paid by the fund would equate to a further 8.5 per cent of the superannuation cost.

Chair Catherine Savage said: "We welcome the resumption of contributions to the NZ Super Fund and note the apparent progression towards funding in accordance with the formula in the NZ Superannuation and Retirement Income Act."

"The Fund's performance has been exceptional. It has returned 10.5 per cent since inception in 2003 and 21.3 per cent over the last 12 months.*

The board was confident the fund would deliver value for taxpayers over the long term, although more normal returns of 7 per cent to 8 per cent a year were expected in future.

"It is important to understand that, for long-term investors such as the NZ Super Fund, market downturns are often when the best investment opportunities can be secured. We are well positioned to take advantage of any market stress."

Savage said the contributions would initially be invested in passive, low-cost equity and bond investments, with new active investments to be added as opportunities arose.

"We retain our strong emphasis on growth investments and as a result the fund continues to be heavily weighted towards shares."