Hands off super, Dunne tells National

BY MARTIN KAY
Last updated 11:02 02/03/2009

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Government support partner Peter Dunne is urging National not to tamper with the New Zealand Superannuation Fund, warning that it would again make state pensions a political football.

Prime Minister John Key has refused to rule out suspending or lowering payments to the fund, which receives about $2 billion a year from the Government, to curb deficits as the recession deepens.

With the Government's books now $6billion in the red, future contributions will have to be funded through borrowing, bringing calls from some quarters for the payments to be frozen.

In its briefing to Finance Minister Bill English, the Treasury suggested suspending the payments as an option to provide cash for infrastructure spending, although both he and Mr Key stressed yesterday that the Cabinet had not discussed it.

However, Mr Key fuelled fresh speculation about the Government's plans when he told TV3 that lowering state contributions to KiwiSaver had been ruled out. He refused to make the same commitment for the fund, although the Government intended to continue payments "at this time".

Mr Dunne, whose one-MP UnitedFuture party is in a confidence and supply agreement with National, said reducing or suspending payments would be a "bad move".

"I would be very concerned about any winding back of the fund or any suggestion that its future was in doubt because I think that then raises the wider question about the security of New Zealand Superannuation.

"There's an argument that because, at the moment, this might have to be funded out of borrowings rather than surpluses, it's a bit dumb to be doing it. There's some truth in that, but at the same time, it seems to me that if you're going through a slow patch economically, given the role that superannuation has long-term, this is the one time not to be putting its future into some jeopardy or doubt."

Labour leader Phil Goff said the reluctance of Mr Key and Mr English to rule out suspending or reducing contributions suggested they were considering "plundering" the fund.

"They should come clean and tell the public what they're intending to do. If it is, as we suspect, contemplating gutting it by not putting money into it or running it down, then that very much is a short-term fix which is going to have pretty severe long-term consequences of putting people's retirement incomes at risk."

The fund was set up in 2002 and was expected to cover about 30 per cent of the superannuation bill once interest started being drawn down from 2020. National initially opposed it, but promised to keep it before the 2005 election.

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The Government is supposed to pay in a set amount each year, but can reduce or suspend that. If so, it must say what steps will be taken to protect the fund's integrity which is likely to mean higher payments once contributions are restored.

- © Fairfax NZ News

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