Cullen Fund no answer to an ageing New Zealand

The biggest single risk created by the Cullen Fund is the false hope it is creating that New Zealand's "super problem" is solved, National's Finance spokesman, Don Brash, said today.

Speaking at the FundSource Conference in Auckland, Dr Brash said the Cullen Fund was giving the Government the ability to "pretend" super was fixed, thus ruling out the need for any future discussion about the parameters of the scheme.

"This is not true. No society can lightly contemplate spending more than twice as much, relative to GDP, as at present, together with a huge projected increase in government-funded healthcare. Together, these government programmes will eat up another 10 per cent of GDP," he said.

Dr Brash pointed out the figure of 10 per cent was based on a projected major ageing of the New Zealand population over the next few decades.

"At the moment, only 12 per cent of the population is over 65 years of age. By 2040, the proportion over 65 years is expected to have doubled to 25 per cent. The implication of this is that the cost of New Zealand Superannuation will more than double as a proportion of GDP."

Dr Brash outlined six key risk factors of the Cullen Fund, highlighting particularly the investment risks.

"This fund will grow to around half the size of the New Zealand economy and the bulk of it is expected to be invested in international equities. I believe the assumed return is too optimistic and the recent experience of the Government Superannuation Fund shows the downside of investing in international shares."

Dr Brash went on to point out other risk factors of the Cullen Fund, including the illusion it created that New Zealand Superannuation was guaranteed, thus giving New Zealanders a false belief that they no longer needed to save for themselves.

"This was highlighted in a recent survey, which revealed the number of people relying on the government to support them in retirement has doubled."

Dr Brash said that the future of New Zealand Super lay largely with the strength of the economy and that there was much more work to be done in this area before the benefits promised by any Super scheme could be secure.

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