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GSF Changes Will Save Taxpayer Money

"The changes the Government is making to the Government Superannuation Fund will save the taxpayer money without compromising the rights or entitlements of Fund pensioners," Finance Minister Michael Cullen said today.

"The Government Actuary has estimated that the decision to allow the Fund to diversify its portfolio into a wider range of equities and bonds has the potential to boost the Crown's fiscal position by $12 million to $42 million a year.

"The savings reflect the anticipated improvement in the Fund's returns as it diversifies away from its current 70 percent investment in Government bonds.

"Members of the Fund will be unaffected by the change. Their retiring allowances, annuities, child allowances, employee contribution rates and options at retirement will be unchanged.

"They will also retain their right of appeal to the independent Appeals Board," Dr Cullen said.

The Government will establish a new governance regime for the Fund, through a new Crown entity called the Government Superannuation Fund of New Zealand.

A GSFNZ Establishment Board will be appointed to manage the transition.

"These decisions are quite separate to the Government's proposed New Zealand Superannuation Fund which is designed to smooth the costs of the aging population through a system of partial pre-funding.

"However the legislation setting up the new GSF structure could easily canvass issues of relevance to the New Zealand Super' debate, including whether some broad ethical norms should be established to govern the investment policies of either or both Funds as investors of public monies.

"I would also point out that the expected increased returns as the GSF is able to spread its investments more into equities are an implicit response to those who suggest that the Government should prepare for the baby boomer cost bubble by simply repaying debt rather than accumulating assets.

"When the Crown repays debt, it is basically only 'earning' the interest payable on Government bonds. The expected savings to the Crown from the GSF diversifying more into equity instruments reflects the higher returns those instruments are expected to yield compared to bonds," Dr Cullen said.

Contact: Patricia Herbert 471-9412 or 025-270-9013

The Government Superannuation Amendment Bill was tabled last week and is expected to go through its first reading either today or tomorrow.

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