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NZ not only country to embrace prefunding

New Zealand is not alone in wanting to prefund future portions of its state pension, New Zealand Superannuation.

Wednesday, February 28th 2001, 1:39AM

by Philip Macalister

New Zealand is not alone in wanting to prefund future portions of its state pension, New Zealand Superannuation.

Other countries such as economic wonderland Ireland and France are also progressing down this route. What's more, moving from a pay-as-you go basis for state super to a partially funded model has won the approval of the World Bank.

However, it does also point out that there have been problems with prefunding, such as:

  • Funds have been used to achieve objectives other than providing pensions
  • These funds have been difficult to insulate from political influence
  • The rates of returns earned on these funds to date were poor relative to relevant indices and also relative to local bank deposit rates.

A recent article in The Actuary journal looking at the proposed Irish Stability Fund says that one of the biggest issues is having an independent board, and clear investment guidelines free from Government intervention.

"The key to success, it seems, is to appoint independent commissioners with a clear and concise mandate to produce excess performance while being cogniscent of the risks taken," Tom Murphy and Jennifer Richards say in their article.

The option currently before the Finance and Expenditure Select Committee sets out to make the guardians at double arms length from the Government.

One of the big issues yet to be decided are the funds investment guidelines.

On this issue there is likely to be major dissention. The Greens want the fund to be invested ethically, while the Alliance has earlier said it sees the fund as providing necessary investment capital for New Zealand companies.

On the other hand actuaries, such as Michael Chamberlain, says the whole fund should be invested in offshore shares.

Earlier stories:

Have your say!

How should the fund be invested? Who should be on the Board of Guardians?

You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

« What is the super fund?AMP & Good Returns launch superannuation website »

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AMP Home Loans 6.49 5.69 6.29 6.40
AMP Home Loans $200k+ 6.39 5.59 5.99 6.30
AMP Home Loans LVR <80% - - 5.99 -
ANZ 5.99 5.85 6.49 6.85
ANZ LVR > 80 5.99 6.35 6.99 7.35
ANZ Special - - 5.95 -
ASB Bank 6.00 5.85 6.49 6.85
ASB Bank Special - - - -
BankDirect 6.00 5.85 6.49 6.85
BankDirect Special - - - -
BNZ - Classic - - 5.95 -
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BNZ - GlobalPlus 6.19 5.85 6.29 6.29
BNZ - Mortgage One 6.60 - - -
BNZ - Rapid Repay 6.19 - - -
BNZ - Std, FlyBuys 6.19 5.85 6.29 6.29
BNZ - TotalMoney 5.99 - - -
Credit Union Auckland 6.20 - - -
Credit Union Baywide 5.85 5.90 6.50 -
Credit Union North 6.45 - - -
Credit Union South 5.75 - - -
eMortgage 6.04 6.15 6.69 7.19
Fidelity Life 5.70 5.40 6.00 -
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Finance Direct 6.10 6.45 6.69 7.10
First Credit Union 6.45 - - -
General Finance 5.95 6.25 6.50 7.10
HBS Bank 5.90 ▲5.60 ▲5.99 ▲6.35
HBS LVR > 80% - - - -
Heartland 5.95 6.25 6.50 7.10
Heretaunga Building Society 5.75 5.50 6.30 -
Housing NZ Corp 5.75 5.50 6.30 6.40
HSBC Premier 6.24 5.59 6.29 6.55
HSBC Premier LVR > 80% - - - -
HSBC Special - - 5.79 -
Lender Flt 1yr 2yr 3yr
Kiwibank 5.90 5.69 5.99 6.40
Kiwibank - Capped 5.65 6.50 - -
Kiwibank - Offset 5.60 - - -
Kiwibank LVR > 80% - - 6.29 6.40
Liberty 5.64 - - -
Napier Building Society 5.80 6.00 6.70 -
Nelson Building Society 6.45 5.95 6.60 -
NZ Home Loans 6.10 5.69 6.29 6.60
Perpetual Trust 7.70 - - -
RESIMAC - lo doc 7.34 7.14 7.49 8.05
RESIMAC LVR < 80% 5.84 5.64 5.99 6.55
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RESIMAC LVR < 85% 6.84 6.64 6.99 7.55
RESIMAC LVR < 90% 7.84 7.64 7.99 8.55
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SBS LVR < 80% - - - -
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Southern Cross 5.95 6.25 6.50 7.10
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Westpac - Offset 5.74 - - -
Median 6.00 5.85 6.29 6.85

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