Labour’s $2.5b plan to restart NZ Super contributions

Restarting contributions to the NZ Super Fund is the first thing Labour would do if it forms a government after September’s election, party leader Andrew Little has revealed.

Labour says it would contribute $2.5 billion to the fund between the 2017/18 financial year and 2021/22 but is holding back details about how it intends to make the payment until it unveils its fiscal plan tomorrow.

Mr Little says restarting contributions to the fund is a priory for the party and is slamming the government for not doing so sooner.

“Despite finally running budget surpluses after eight years of trying, the government says it won’t resume National Super contributions until the 2021/22 financial year while promising tax cuts that will hand $400 million to top income earners.”

He says Labour would contribute $500 million in the 2017/18 financial year, rising to $1 billion the next year, $1.5 billion the year after, $2.2 billion in 2020/21 and to $2.5 billion in 2021/22.  

The cumulative impact of the contributions, including interest and return on investments, would mean that $2.5 billion would be worth $9.66 billion, the party says.

“This would equate to $6500 per person extra in the fund by 2021/22 under [a Labour government.]”

As previously signalled by the party, the age of eligibility would remain at 65.

In March, Prime Minister Bill English announced the age for superannuation would rise to 67 in gradual steps over 20 years.

Speaking to NBR Radio, Labour finance spokesman Grant Robertson says his party’s plans for the increased contributions are “one part of making sure we can keep the age at 65.”

“When the government suspended contributions in 2009, it said it would restart them when it got into surplus – but it didn’t do that,” he says.

Mr Robertson says NZ Super itself – whose fund is worth $33 billion – estimates the size of its fund would now be $52.6 billion, had the government continued its contributions over the last eight years.  

Wait and see
As to how the party will fund the payments, Mr Robertson recommends waiting and seeing until tomorrow when it unveils its fiscal plan.

But he does say the party has been clear the revenue generated by reversing National’s planned tax cuts, as well as some additional borrowing that a Labour government will be able to do because its debt reduction targets are slightly slower than National’s and also revenue generated by the multinational tax crackdown, will mean it will have the money to restart contributions.

Labour does not have any major plans for a shakeup in NZ Super’s governance at this stage, but says once the party gets into government: “we would want to have some discussions with the Super Fund over how things are operating.”

“It is a very successful fund and the reason we can look at these contributions and say, cumulatively, based on the past performance of the fund, there will be nearly $10 billion extra in the fund as a result of us restarting contributions and the interest they earn.”    

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