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Tumbling world stock markets have taken a toll on the taxpayer-backed New Zealand Superannuation Fund, which still retains bipartisan political support after its $881 million loss.
The so-called Cullen Fund - into which the Government pumps about $2 billion every year to help to fund future pension payments - felt the fallout of turbulent markets and reported the hefty after-tax loss in the year to June 30.
Before tax the loss was $716 million and, as a percentage, the fund's return was negative 4.92 per cent before tax.
The super fund still has a solid positive return over its lifetime but the negative result in the past year will have an impact on the Government's accounts, which are set to be released on Monday.
Finance Minister Michael Cullen yesterday urged people to remember the super fund was a long-term proposition.
"Not many investors in global equities would have avoided incurring mark-to-market losses in the value of their shareholdings late last year and in the first half of 2008."
Indeed, the fund - with its mixture of largely overseas shareholdings, local stocks and a variety of other property and fixed-interest investments - was expected to have a tough year given the ill-health of financial markets.
It will not, however, become a political football in the election campaign.
National's finance spokesman, Bill English, yesterday reinforced his party's position on the fund, saying a National-led government would keep it and continue contributing at the amounts required under current legislation.
"They have been affected in the same way as pretty much every other investment in the developed world," he said. "At times like these, you need to take a long-term view."
Mr English said the fund's average return since it began was still "fairly solid" and National hoped markets would bottom out and turn around so the fund could get its returns back up again.
"We want to keep the fund and we will follow the formula in the legislation," Mr English said.
The amount that goes into the fund each year from the Government is determined by a complicated formula and it has actually edged above $2 billion a year.
That means there is not as much money available for the Government to spend on other things.
As the fund gets bigger it also has a more noticeable impact on the Government's accounts. In recent years the fund's positive earnings have helped to inflate big surpluses, and now its negative returns will do the opposite.
At the end of its June 30 financial year, the fund's overall assets had grown to $14.13 billion and it will get much larger before it is ever used to help pay for future pension payments.
Under law, no capital withdrawal is allowed before July 1, 2020.
Even then it will only partially fund the cost of future pension payments, which are set to skyrocket due to New Zealand's ageing population.
The Greens yesterday again questioned the ethics of some of the fund's investments, although the party said it had lost money for "reasons beyond its control".
