By VERNON SMALL deputy political editor
Finance Minister Michael Cullen will this afternoon unveil the Coalition's giant state-funded superannuation scheme, aimed at smoothing the rising cost of pensions over the next 50 to 60 years.
He will outline the plan, agreed between Labour and the Alliance, in simultaneous briefings for the media, the Opposition and representatives of business, sector groups, the superannuation industry and the elderly.
The fund will need the support of either the Greens or New Zealand First to become law.
But Prime Minister Helen Clark has said the Government will set money aside even without majority support in Parliament. She said she was prepared to fight the 2002 election on the issue.
The Greens support a universal state-funded pension, but are sceptical about some aspects of the Coalition plan. Dr Cullen has agreed to brief Green MPs on their concerns next week.
Green co-leader Rod Donald said the party queried Treasury's population projections and also wanted assurances that the fund would not be invested unethically, such as in armaments or cigarettes.
New Zealand First favours a scheme that pre-funds future pension costs, but wants assurances that the money will not be raided by politicians and would prefer individual accounts, rather than a single pooled fund.
National has not closed its door, but has criticised the process the Government adopted and raised strong reservations about the fund itself.
Although details have not been released, the broad shape of the scheme has been foreshadowed, so it is possible to answer some questions about its likely provisions:
Why is it being set up?
The cost of superannuation is currently about $4 billion a year, or 4 per cent of gross domestic product. That is due to rise to 9 per cent of GDP by 2050 and the Government believes it is necessary to set money aside now.
How will it be financed?
About 6 per cent of GDP ($6 billion on the present size of the economy) will probably be set aside each year. Of that amount, 4 per cent of GDP will be used for the annual cost of pensions and the remaining 2 per cent will be retained in the fund.
Where will the money come from?
It will be set aside from the Government's Budget surpluses.
How big will the fund become, and how long will the Government pay into it?
Preliminary figures show the Government contributing cash to the fund until about 2025, when it will reach about $112 billion. It will continue to grow from its investments until between 2050 and 2060, when it will reach more than $240 billion. The projections are based on an annual return of 7 per cent on the fund's investments and a tax rate of 33 per cent.
When will it get underway?
From next July. The Government has set aside $600 million for the fund next year and $1.2 billion in 2002.
Will politicians be able to interfere with it?
The Government may try to "entrench" the law setting up the fund, meaning a 75 per cent vote in Parliament might be needed to change it. But entrenched clauses can be overturned by a simple majority.
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