Tinkering with bill clears way for superannuation fund

By VERNON SMALL DEPUTY deputy political editor

The cabinet has approved a change to legislation to appease New Zealand First leader Winston Peters, clearing the way for a giant state superannuation fund to be written into law.

Finance Minister Michael Cullen says new wording, hammered out in talks with Mr Peters last week, should see the bill setting up the fund safely through Parliament this year.

It now has the backing of Labour, the Alliance, United Future NZ and NZ First, comprising 65 votes in the 120-seat Parliament.

The crucial change was to a clause allowing a possible future split of the fund into individual accounts.

As first drafted, the bill required the fund's guardians to report within two years on ways to convert the fund to "eligible" individuals if Parliament decided to look at that option.

But, after pressure from Mr Peters, the period has been shortened to a year and a specific report on the best means of allocating the fund among individual accounts will be required.

"The allocation would be to contributing taxpayers aged 18 or more and would be paid out according to the specific amount that person had paid in," Dr Cullen said.

It would be based on the amount of income tax paid since the fund was set up.

In the Budget, $600 million was allocated to the scheme this year, but that could not be invested until the fund was formally established.

Dr Cullen thanked New Zealand First for its support, but repeated that Labour and the Alliance opposed a switch to individual accounts.

He said such a move would be unfair to women, low-income earners and people with interrupted work histories.



Greens co-leader Rod Donald, whose party opposes the pre-funding scheme, said individual accounts would be "deceitful, expensive and discriminatory."

"I am really disappointed that Dr Cullen is prepared to accommodate Mr Peters' fixation, when any move to split the fund into individual accounts undermines the very heart of our superannuation system."

But Mr Peters said individual accounts would be fairer than the present scheme for women, Maori and low-income earners.

"Right now if you die before retirement you get nothing for your taxes paid over the years," he said.

Mr Peters also pressed for limits on overseas investment by the fund, but he has accepted that the Government will not bend on that issue.

National's finance spokesman, Bill English, said the deal was a victory for political expediency.

"New Zealand businesses will be left begging for the leftover scraps from the table after Michael Cullen invests the vast bulk of the fund overseas.

"Mr Peters' 'putting New Zealand First' rhetoric sounds hollow today."