Cullen fund suspension costing $1 million a week

02:08, Apr 23 2010

The Government has missed out on an extra $1 million a week because of its decision to axe contributions to the Cullen superannuation fund while times are tight.

But the effect on the long-term strength of the New Zealand Superannuation Fund – set up to partly pre-fund spiralling pension costs when baby boomers retire – will be even greater.

The Treasury estimates that by 2050 the fund will be worth $49 billion less than if the full contributions had been maintained.

That means that in 2050 the fund will cover just 7 per cent of the cost of superannuation, against 11 per cent under the full-funding model. In the meantime, the Government will also miss out on extra tax the fund would have paid from its higher earnings.

The $1m a week figure takes into account interest on the extra money the Government would have needed to borrow to keep contributions as they were.

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