The financial portfolio has also experienced significant changes over the past 15 years
- Figure 4.4 - Breakdown of commercial portfolio changes
- Source: The Treasury
The financial portfolio has also experienced significant changes over the past 15 years. However, unlike the social and commercial portfolios where movements were primarily favourable, the substantial increase in financial assets has been offset to a significant extent by increases to, and the recognition of new, liabilities.
- NZS Fund contributions were introduced in 2001 in order to partially pre-fund the expected future costs of New Zealand Superannuation. These amounted to $14.8 billion between 2001 and 2010, when the Government temporarily suspended contributions pending the Crown';s return to a sufficient budget surplus. Contributions are forecast to resume in 2016/17.
- Figure 4.5 - Breakdown of financial portfolio changes
- Source: The Treasury
- Other sources of growth within the financial portfolio contributed $24.4 billion over the past 15 years. This is made up primarily of Crown budget surpluses during the 2000s, which boosted NZDMO's assets, and the returns on investments held within the financial portfolio.
- The increase in the ACC unfunded liability is the single largest movement within the financial portfolio, offsetting two-thirds of the gross increase in financial assets. The predominant factor in this movement is the change from pay-as-you-go to full funding - in 1999 for the levied accounts and 2001 for the Crown-funded non-earners' account. As a consequence of the change to full funding, the accounting policy was changed to recognise the unfunded liability of the earlier claims. ACC was then able to better report its progress in collecting additional revenue to cover the cost of that liability. ACC was initially required to be fully funded by 2014, but this was extended to 2019 in 2010 following a significant increase in the liability between 2004 and 2009.
- Other factors contributing to the increase in the ACC liability during that period include a decline in rehabilitation performance, an increasing number of claims and a change in accounting standards as well as the impact of the global financial crisis bringing lower returns on investment.
- Over the past two years, ACC has had a significant turnaround in performance, recording a $2.5 billion reduction in the net liability in the 2009/10 year and is projecting a surplus of in excess of $3.5 billion in the 2010/11 year. The turnaround in performance is on the back of a focus on the fundamentals of the ACC scheme: cost control, improved investment returns and innovations in service delivery.
