National decides to back Cullen fund

National has changed its mind about opposing the flourishing New Zealand Superannuation Fund.

The major policy u-turn was decided at the party's caucus meeting on Tuesday and will be announced in a speech on retirement issues to be given by leader Don Brash on Monday night in Auckland.

The Herald understands the change of heart came because National had recognised it could not keep using the fund as a political football and it was keen to get superannuation off the political agenda.

Reversing its opposition to the fund, also known as the "Cullen fund", has been a possibility for some time.

The Herald understands Dr Brash himself supported the change in stance and that he even supports keeping up Labour's level of contributions.

Although the scheme was felt not to be ideal, National is keen to move on to other issues which might have more impact on Labour - such as tax cuts.

The move may represent a significant shift towards a political consensus across the centre of the political spectrum on how to deal with the growing demands on national finances from the ageing population.

Commenting on National's decision last night, Finance Minister Michael Cullen said the greater the political consensus around the fund, the safer New Zealanders' long-term security in retirement.

The fund is set to reach $6.3 billion by next June.

"National campaigned for the abolition of the fund in the last elections so this represents a step forward," Dr Cullen said.

But he wanted evidence National understood that contributions to the fund were to be made out of Budget surpluses, and that the money paid in was not there for spending elsewhere.

He said that during the 2002 election campaign National was promising to spend every dollar three times - to cut taxes, on new spending initiatives and in faster debt repayment.

"This time, I will be insisting on a higher level of fiscal honesty," Dr Cullen said.

In June he accused National of planning to "steal" the fund assets from future pensioners for tax cuts now.

Dr Cullen said he would now write to National inviting it to sign up to the second part of the New Zealand Superannuation Act, which was passed in 2001 and provides for the establishment and governance of the fund.

National's finance spokesman, John Key, refused to confirm or deny National's new policy last night. A spokesman for Dr Brash said he would not pre-empt Monday's speech.

The fund was established to partially fund the growing cost of national superannuation after 2020.

As the cost of superannuation rises, the Government will progressively draw money from the fund to help to smooth the impact on its finances.