Box 2 - Contributions to the New Zealand Superannuation Fund
The Government has decided to delay resuming contributions to the NZS Fund until net core Crown debt falls below 20 per cent of GDP.
Cash surpluses are expected from 2017/18 onwards. The choice at that point is whether to use these cash surpluses to reduce debt to more prudent levels or whether to put money into world share markets while holding higher debt. The Government considers that the first option is clearly more responsible, given the importance - outlined elsewhere in this Fiscal Strategy Report - of paying back debt. It is also the lower-risk option given the volatility and risk of investing in international stock markets.
Once net debt gets below 20 per cent of GDP, the Government is comfortable with building up the NZS Fund, which currently holds over $21 billion of financial assets.
As a result of this change, NZS Fund contributions are projected to resume in 2020/21 - two years later than was projected in the Half Year Economic and Fiscal Update and, in fact, the same time as was expected when the Government initially suspended contributions to the NZS Fund in Budget 2009.
It is important to stress that this short delay in resuming contributions to the NZS Fund will not in any way affect New Zealanders' entitlement to New Zealand Superannuation, either now or in the future. The Government has been very clear that it has no intention of changing the age of eligibility of New Zealand Superannuation, the way that payments are calculated, or the link to 66 per cent of the average wage for a couple. Delaying contributions to the NZS Fund will not change the Government's ability to make these payments, because low debt is equally as important as NZS Fund assets in meeting some of the future fiscal pressures from population ageing.