ACC architect says people paying more in levies than they should

Sir Owen Woodhouse. Photo / Natalie Slade

The architect of the ACC scheme says the rejection of his pay-as-you-go design means people will pay 30 per cent too much in levies.

Sir Owen Woodhouse said his original design was the only fair and affordable way to financially support the injured. He said the 1999 change to a fully-funded system was a grave mistake.

Under the original scheme, ACC collected only enough levies each year to cover the cost of claim payments that year. But in 1999 the government changed it to a "fully-funded" system, in which enough money is collected each levy year to cover the lifetime costs of anyone injured that year.

Speaking at his Auckland home, the 95-year-old Sir Owen refused to join the debate over the corporation. But he stood by a paper he wrote late last year that described the 1999 system as a "needless funding exercise".

Sir Owen had expected a return to the original system, as he designed it, but on Thursday ACC Minister Judith Collins ruled out pay-as-you-go.

"I am surprised," Sir Owen said in his paper. "The strange reason given is that people in the future should not have to pay for those whose injuries have been caused by an accident in some earlier year. I disagree.

"The question for ACC is not how or where or when some physical damage occurred, but whether it is an injury or a sickness."

The pay-as-you-go model funded injuries the same way the health, education and social welfare systems were funded - by collecting each year what had to be paid out that year.

This year, ACC expects to collect $5b in levies and pay out $2.8b to claimants. The corporation has investments of $19.5b and a net liability of $4.5b.

The Greens' Kevin Hague and Labour's Andrew Little have proposed dumping the fully-funded model, which would lower levies by nearly a quarter.

But Collins said some claimants could be with the corporation for up to 80 years, so it was unrealistic to shift to pay-as-you-go.