by Rob Hosking
Finance Minister Michael Cullen has put a bit extra, a mere $80 million, aside for his mammoth superannuation fund.A flush-with-cash Dr Cullen announced in the Budget that the contributions to the New Zealand Superannuation Fund this coming financial year would be $80 million more than initially forecast.
Earlier forecasts had contributions to the fund gradually rising to $2 billion a year by 2005, but the government’s extra money moves that closer than earlier expected.
That was the only real unexpected move in what was a no-surprises Budget.
One thing the budget made clear was how important the fund is to this government. In fact it is the cornerstone of its fiscal management programme.
The opening sentence of the Fiscal Strategy Report states baldly that the overall aim of the strategy has been to build “operating surpluses to meet New Zealand Superannuation Fund contributions, while meeting capital pressures and managing debt at prudent levels.”
Elsewhere in the Budget documents, the government commits itself to “focus[ing] on building the New Zealand Superannuation Fund rather than reducing debt.”
Disincentives removed
As was announced last week, the Budget also brought forward moves to remove one of the disincentives to employment based superannuation schemes.
The tax change will mean all employer contributions to superannuation funds are taxed at the employee’s marginal rate, not the current flat rate of 33%.
That will mean the government foregoing $7 million in revenue in the first year, and $29 million annually after that.
Investment Savings and Insurance Association chief executive Vance Arkinstall says this "is a move in the right direction but represents only a tiny step towards addressing the concerns of New Zealand savers.”
He says it should have happened two years ago.
“It is, however, strange that high income members (earning over $60,000) of a superannuation plan benefit from a 6 cent tax break, but middle and low income earners will be taxed at their marginal tax rate. Surely it is the low and middle-income earners who need the assistance,” said Mr Arkinstall.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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