Plans to suspend contributions to the New Zealand Superannuation Fund until 2020 are a short-term action and could bring long-term pain, says consulting, outsourcing and investments firm Mercer.
Government contributions were previously running at $2.4 billion annually and the budget today suspended automatic contributions to the fund.
Mercer's New Zealand business leader Martin Lewington said that while recognising the Government was under significant budgetary strain, Mercer was concerned suspending contributions to the fund -- even temporarily -- might put future governments and generations under significant pressure to change NZ Super.
"Reducing funding now without any other significant reform around retirement saving policy, such as increasing the NZ Super entitlement age or providing alternative retirement savings mechanisms, will only add to the financial pressure on the fund in the future," he said.
The fund was set up as a mechanism to pre fund or provision for a portion of the NZ Super costs of New Zealand's ageing population.
Contributions were planned for investment over a long time frame, over which returns on risky assets were expected to exceed returns on New Zealand government debt.
"Suspending contributions to the fund in the short-term obviously means less future accumulation. This may well lead to future governments needing to make larger contributions to recover this suspension or ultimately bear higher NZ Super costs due to the shortfall in draw-downs from the fund."
