As the recent UK strikes highlighted, the affordability of public sector pensions is providing another point of tension in an aging society.
Of course, it didn't make the headlines proper here until Top Gear frontman, Jeremy Clarkson, put his big foot in it by calling for public executions.
Notwithstanding Clarkson's dubious credentials as a superannuation expert, his claim that public service workers can all look forward to "gilt-edged pensions" probably echoes popular sentiment.
The idea that government workers are entitled to a generous pension at a set rate (usually based on final year income and often referred to as a 'defined benefit'), pervades.
If it ever was the case here in New Zealand, it's certainly not that way now. Most public service workers get the same super deal as private sector employees: a mix of lifetime employee/employer contributions plus (or minus) whatever market returns their investments earn over that period.
While the state has created several savings schemes specifically for government workers, KiwiSaver is gradually replacing even these.
Despite the shift to 'defined contribution' government employee retirement schemes, there is a 'gilt-edged' superannuation legacy still weighing on New Zealand's books.
Approximately 65,000 current and former state employees are still due 'defined benefit' pensions under the Government Superannuation Fund (GSF), which fortunately for taxpayers closed to new members in 1992.
While the GSF is partially funded by an investment pool (currently sitting at just over $3 billion), a further $10 billion of pension liabilities remains 'unfunded' - that is the government has to tip in our money each year to pay out on those rash promises made decades ago. Over the last few years the government has contributed between $600-700 million annually out of tax revenue to make up the difference.
And according to the latest Treasury estimates, the total GSF liability has blown out further, adding $1.05 billion of future payments to our bill.
The number was actuarially calculated by "an increase in the assumption regarding future mortality improvements" - that is, all those old judges, policemen, MPs etc are living longer than first expected.
But the latest Treasury estimates of the ongoing health of aging public servants appear more optimistic than previously calculated.
In his final 'Actuarial Valuation' of the GSF earlier this year, the now-retired Government Actuary (don't know what super scheme he signed up for), David Benison, was, on average, downbeat, picking the rate of improvement of life expectancy would stay close to past levels.
"Historically, improvements in mortality, for the GSF have been in the range of 1%-2% per annum," he says in the report. "Views by industry experts on whether future improvements will continue at historical levels differ. I believe it is not unreasonable to adopt a level of improvement at the lower end of the range."
By David Chaplin-
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