Super funds contribution to costs rises
Finance minister Michael Cullen told Parliament the NZ Superannuation Fund will pay for much more of the state pension than originally estimated.
Thursday, March 4th 2004, 8:57PM
This is an uncorrected transcript—subject to correction and further editing of a question asked in Parliament today.
Superannuation—Costs
1. MARK PECK (Labour—Invercargill) to the Minister of Finance: What is the estimated increase in cost in New Zealand Superannuation over the next 40 years and what measures has the Government taken to prepare for the increase?
Hon Dr MICHAEL CULLEN (Minister of Finance): In 40 years’ time, net spending on New Zealand superannuation as a proportion of the gross domestic product will roughly double; increasing from 3.6% now to 7.3%. The Government is preparing for that increase by setting up the New Zealand Superannuation Fund, which, according to the latest estimates, will contribute around 34.8% of total New Zealand superannuation costs.
Mark Peck: Would the Minister tell the House what the purpose of the fund is?
Hon Dr MICHAEL CULLEN: To ensure that New Zealand superannuation is viable from age 65 at 65% of the average wage for a married couple into the future. Otherwise, we are asking the generations under 50 to pay for a benefit they will never receive. Dr Brash may think that is fair. We think it is unfair and divisive.
Gerry Brownlee: I raise a point of order, Mr Speaker. So it is all right now for a Minister, in an answer, to express an opinion on behalf of another member? Is that what you are accepting?
Mr SPEAKER: I have to say that if I ruled out every single thing like that, I would be ruling out things all day. If the member wants me to do that, I am happy to abide by a much tougher regime. I thank the member with regard to that, and I will rule the last sentence of the answer out of order.
Hon Dr MICHAEL CULLEN: I raise a point of order, Mr Speaker. I was expressing my opinion, not an opinion on behalf of some other member over there.
Mr SPEAKER: That is right, and that is why I will listen very carefully.
John Key: Does the Minister stand by his statement of 28 October 2000 that: "We recognise that changes in life expectancy and medical science may lead some future government to consider raising the age above 65 but would expect that any such review would be 25 to 30 years away"; and does he accept that he himself made those comments because the New Zealand Superannuation Fund, at the very best, pre-funds only a small fraction of the significant increases that the ageing population presents?
Hon Dr MICHAEL CULLEN: Dealing with the last point, 35.8%, in terms of the current level of New Zealand superannuation, would represent something like $125 per week to a married couple. From Mr Key’s perspective, that may be a small amount of money. For those presently retired, it certainly is not.
Gerry Brownlee: I raise a point of order, Mr Speaker. I know that you will probably rule that the Minister addressed the question, but he has addressed the question by ignoring it. The question asked whether he stands by his own comments, which are that there will be changes to national superannuation in 20 to 30 years’ time.
Mr SPEAKER: The member was asked whether he stands by his comments. He could perhaps give a one-word answer to that.
Hon Dr MICHAEL CULLEN: I not only stand by my comments but also say there is also absolutely no reason, for the foreseeable future, to change the age of eligibility—unless, of course, one abolishes the Superannuation Fund to pay for tax cuts for people like Mr Key.
Hon Dr Nick Smith: Point of order—
Mr SPEAKER: I warn members that there are too many points of order that I think are not points of order. This had better be a point of order.
Hon Dr Nick Smith: I raise a point of order, Mr Speaker. You earlier ruled that it was improper for Mr English to make any improper inference, in respect of a question he asked yesterday. Yet twice today we have heard Dr Cullen make inferences of a negative nature about colleagues on this side of the House that were totally unnecessary in answering the question.
Mr SPEAKER: That is not correct. It was about unlawful conduct, not about comments that members can make in the course of vigorous debate.
Hon Brian Donnelly: Can the Minister confirm that his current superannuation fund is not secure in the future in its present form and could be utilised for any pet project, if, for example, a National-ACT Government gets in; and can he also confirm that the only way to really secure it is to put it into private accounts?
Hon Dr MICHAEL CULLEN: No. The only way to really secure it is to keep voting for those parties that support it.
Rod Donald: Did the Minister take, then, National leader, Bill English’s, statement during the third reading debate of the New Zealand Superannuation Bill on 10 October 2001 that: "We support Part 1, because New Zealand can afford the payment of 65% of the average wage to married couples at age 65.", as a firm commitment on behalf of his party; and does he take Dr Brash’s statements yesterday, in relation to lifting the age of entitlement to those under 50, as breaking that commitment and therefore the consensus on superannuation?
Mr SPEAKER: Neither of those questions is in order because neither relates to the direct responsibility of the Minister.
Hon Dr MICHAEL CULLEN: Under the New Zealand Superannuation Act, I have responsibility for parties signing up to the schedules of the Act, which are in Part 1, which is what the member refers to.
Mr SPEAKER: The member can have a go at rephrasing his question, because I am being generous, but he had better relate it to the responsibility of the Minister.
Rod Donald: Could the Minister please confirm that under schedule 4 of the New Zealand Superannuation Act, parties are invited to confirm with him their commitment to Part 1 or Part 2 of the Act; and did he take the statement in the House on 10 October 2001 from then National Party leader, Bill English, that: "We support Part 1, because New Zealand can afford the payment of 65% of the average wage married couples at age 65.", as a commitment under schedule 4 of that Act, and has Dr Brash reneged on that?
Mr SPEAKER: Everything is right, up to the last four words.
Hon Dr MICHAEL CULLEN: Yes, I did, and indeed I wrote to all party leaders inviting them to sign up to Part 1 and/or Part 2. The National Party declined to sign up to either Part 1 or Part 2.
Gordon Copeland: Can the Minister advise the House of which parties have formally signed up in support of the part pre-funding of future pensions through the New Zealand Superannuation Fund; and has he received any advice concerning the National Party’s intentions in relation to that fund?
Hon Dr MICHAEL CULLEN: Yes. Labour, Progressive, and United Future have signed up to both Part 1 and Part 2, and the Green Party has signed up to Part 1, the level of payments. The National Party stated that it would abolish the fund, although this morning Dr Brash said that he had not yet made up his mind on that.
John Key: Does the Minister agree with John Tamihere that the age of eligibility for New Zealand superannuation needs to be lifted from 65, along with the introduction of means-testing—a position endorsed by the Retirement Commissioner—and if he does not consider that there is a risk, why has he proposed in the Public Finance (State Sector Management) Bill that Treasury report to Parliament every 4 years on the costs and risks of demographic population changes?
Hon Dr MICHAEL CULLEN: Because the latter covers a very wide range of Government spending, not the least of which is health spending, of course, which is highly demographically related. I refer the member to the letter that Mr Tamihere wrote to the Timaru Herald, correcting the story that it carried.
Ron Mark: Has the Minister considered any reports by any political party leader promising that a future Government led by him or her would not move quickly to lower the age of eligibility for national superannuation; if so, what conclusions did the Minister draw?
Hon Dr MICHAEL CULLEN: Yes, I have. The conclusion I drew is that when people indicate they might do something, they usually end up doing it much faster and much more nastily than they previously said. I witnessed such events in 1991 and 1999, in that regard.
(uncorrected transcript—subject to correction and further editing)
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