Misunderstanding of Government Superannuation Fund

Our Policy is generally not to publish anonymous posts or comments.   We publish the below as it shows a misunderstanding of the history and role of the government employees  contributory pension fund.   We publish with it a statement of the correct information from the Auckland Government Superannuitants Association web site.

Its not the sustainability of NZ Super that is the problem (that can be altered anytime Parliament wishes to amend it), it is the Govt. Super Fund (GSF) for its retired employees (including the MPs) pensions that are index linked that are the problem. Those GSF contracts are ipso facto and the Govt doesn’t want to acknowledge this simple fact. So far, these GSF ipso facto pensions have had $14 BILLION of tax payers monies since 1997, $680 Million this year alone with an ever increasing amount every year for the next 50 years!

The Government Superannuation Fund

The GSF scheme is a contributory defined benefit superannuation scheme, which began in 1948 and has been closed to new members since 1991.

Defined benefit schemes are negotiated between employer and employee to replace part of salary, to provide a retirement income. By paying a lower salary the employer can contribute a negotiated percentage of salary to the superannuation scheme as does the employee who contributes 5-10%.

Contributions to the fund are taken from the earnings of the employee, and or directly by the employer fortnightly, but in either case they are part of the total lifetime remuneration received by employees, and are a contract between employee and employer, with both parties having a shared interest/responsibility, deriving from the employment relationship.

In the case of the GSF, the employees contribution has been paid into the defined superannuation fund (GSF), but no payment has been made by the Government  as employers – a deliberate policy decision.  Instead the Government, as employer, has used the resulting savings on the employers contributions and the theoretical investment returns, on other projects as they see fit, and   only meets the balance of the costs of the employee’s entitlements on retirement or exit from the state sector, as they become payable, out of current taxation revenue. If the Government as the employer had made real time contributions to the fund, there would have been no need for significant contributions from current revenue.

The origins of the GSF began in colonial times, when it was seen as a way of rewarding government employees for their service, of guarding against corruption and bias and of enabling the State to rid itself of unwanted staff without imposing undue hardship. It came to be recognized as an essential element in a contract between the state and its employees, in which employees traded the generally higher incomes available in the private sector and their inability to gain a share of the capital, for job security and other benefits.

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