Super fund payments by 2020

The Government has not changed its stance on the age of eligibility for superannuation remaining at 65 years, but said contributions to the ''Cullen Fund'' could resume by about 2020.

Also, as surpluses grew, it would conduct a KiwiSaver auto-enrolment exercise for non-members.

Labour has proposed compulsory KiwiSaver membership, something the Government seems likely to match through auto-enrolment.

At present, the number of KiwiSaver members aged 18-64 was equivalent to 85% of the labour force and auto-enrolment was expected to increase that proportion, Finance Minister Bill English said yesterday.

The Government would resume contributions to the New Zealand Superannuation Fund once net core Crown debt was no higher than 20% of GDP.

Mr English cut contributions to the fund - named after former finance minister Sir Michael Cullen, who established it - when National took power in 2008 and faced what was then called a decade of deficits.

Treasury forecasts released as part of Budget 2014 indicated the target debt level would be reached by the 2019-20 year.

''It is important to stress this short delay in resuming contributions to the NZ super 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 it has no intention of changing the age of eligibility of NZ Superannuation, the way payments are calculated, or the link to 66% of the average wage for a couple.''

Delaying contributions to the fund would not change the Government's ability to make those payments, because low debt was as important as super fund assets in meeting some of the future fiscal pressures from an ageing population, Mr English said.

Financial Services Council chief executive Peter Neilson was disappointed the Government kept in place the world's most ''punitive'' tax regime for superannuation savings.

Someone saving for retirement over 40 years, on the average wage, in a KiwiSaver default fund lost half their retirement nest egg due to the impact of tax rates on compound returns - interest on interest.

Any dollar paid in tax within a KiwiSaver fund was a dollar not reinvested to earn interest on interest for the balance of the 40 years of saving to 65.

''Most countries have tax concessions for retirement savings. In New Zealand, the effective tax rates on KiwiSaver funds are much higher than on any other forms of retirement savings, such as investing in rental property,'' Mr Neilson said.

Superannuation
- No change to superannuation entitlement age
- Contributions to Cullen Fund will resume in 2020
- Disappointment in no tax changes for KiwiSaver

 

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