Budget affirms commitment to security in retirement

Budget 2002 demonstrates the government’s strong commitment to maintaining security of income for older New Zealanders, says Finance Minister Michael Cullen.

The budget figures show the New Zealand Superannuation Fund will have reached almost $9 billion by 2005-06 and that the projected surpluses over the forecast period will be sufficient to both meet the Fund contributions and the government’s debt targets.

Dr Cullen said the Fund continued the government’s strong record on New Zealand Super.

"One of our first actions on coming into office was to reverse the previous government’s decision to cut to 60 per cent the 65 per cent wage relativity floor set by the 1993 multi-party Accord. That added another $21 a week to the married couple rate.

"But even as we have protected the value of the public pension, we have also emphasised the need for people to save privately if they want a comfortable standard of living in retirement.

"The government has concluded that employment based superannuation schemes offer the greatest potential to encourage savings behaviour with the least risk to the revenue," Dr Cullen said.

"Employers’ contributions are now generally taxed at 33 percent irrespective of the employee’s individual tax rate. The options under review are:

• to match the withholding tax paid by employers to the statutory marginal tax rate paid by the worker; or
• to extend the 6 per cent concessional rate now enjoyed by those earning over $60,000 a year to all income earners.

"My intention is make the new regime effective from 1 April, 2004," Dr Cullen said.