Smith Lockwood: Government Superannuation Fund Amendment Bill (No 2) — Third Reading 
Smith Lockwood: Government Superannuation Fund Amendment Bill (No 2) — Third Reading 
[Volume:606;Page:3921] 
Dr the Hon LOCKWOOD SMITH (NZ National—Rodney) 
: 
 During the Committee stage of this bill we witnessed an extraordinary situation. We have a situation where I think most members of this House agree with this legislation and support it yet the Committee stage on such a simple little piece of legislation involving just two small parts with only a couple of clauses to each part took a long long time to get through—I am not allowed to say why. 
This legislation remedies something that was originally done in 1985 and it seems that the then Labour Government when it brought in the new provisions—the new Government Superannuation Fund schemes—forgot about the people on the old schemes. It did not seem to care about the people on the old schemes. Under the old scheme when people died spouses who remarried were forgotten about whereas the new scheme looks after them. I think that most members of this House do not consider that a very equitable situation and it is good that Parliament is able to remedy the position now. 
There are couple of things of interest in respect of this legislation. We heard the Minister of Finance—after all it is his bill; or at least the bill is in his name—mention a moment ago that the official advice as to the fiscal cost was that it was in the order of $2 million to $2.5 million a year. That may not sound like a huge amount of money but what is really significant about the Government Superannuation Fund schemes and any payments made under them is that the Government Superannuation Fund is a defined benefit scheme. That means that those who qualify to receive payments or annuities or allowances from it do get a specified amount of money. What is really interesting about this legislation of course is that the particular fund involved in this legislation the Government Superannuation Fund has lost a vast amount of money in the last few months. In fact in the last 14 months it is estimated that the Government Superannuation Fund may have lost as much as $380 million. The question that therefore arises is whether the fiscal provisions for this piece of legislation are totally adequate because we know that the Government Superannuation Fund is not sufficient to meet the defined benefits that the fund has to meet. 
So there is already a taxpayer commitment to topping up this fund and it varies each year. Members will note from the Budget each year there is an allowance made for the changes in this fund and therefore the liability to the Crown in having to top up the payments made under the defined benefit nature of this scheme. That is of course why Dr Cullen has recently tried to avoid having his surpluses muddied by that and developed the Operating Balance Excluding Revaluations and Accounting Changes—OBERAC. Basically it excludes adjustments for the Government’s superannuation fund. 
Mr SPEAKER 
: This can be commented on in passing but only in so far as it relates to the operation of this bill—not general comments about the Government Superannuation Fund. 
Dr the Hon LOCKWOOD SMITH 
: Thank you Mr Speaker. I appreciate your guidance but of course if sufficient money is not appropriated this scheme cannot work. As I pointed out this is defined benefit scheme. The money that this legislation will require is not money the Government can appropriate each year then say: “That’s what we’re going to pay to the people who now qualify under this bill.” That is all pre-defined all predetermined and that is why it becomes quite an interesting issue as we debate the third reading and the operations of this bill. 
As I pointed out the benefits are defined. The Government cannot simply appropriate money or make a Budget policy decision and say: “We’re going to pay this amount.” because the benefits are defined. The Government now under this legislation has to face commitments that are difficult to work out because when it has a fund that is going up and down—and as I said in the last 14 months it has lost $380 million—the amount that the Crown is going to have to appropriate to meet the defined benefits in this scheme is unknown. That is why I think that Dr Cullen could not be very specific about the actual fiscal costs of this legislation. Fortunately the number of people involved is not great—say 800 widows and maybe a small number of children say 19—but that does not mean to say that it is not important legislation. Even if the Government had to stump up all the money—and I suspect that it will have to stump up all the additional money because already the Government Superannuation Fund as I understand it is not meeting the defined benefits it is required to meet. Fortunately we do know the number of people involved; therefore those estimates of fiscal cost should be reasonable. 
There was some debate over Part 2. The select committee in fact recommended and the Committee of the whole House agreed that subsection 6(b) inserted by clause 4 be struck out. It was not entirely convincing as to why that should be. A quite important aspect of the original drafting of the bill was that it made it clear that recipients of this defined benefit under this amendment to the Government Superannuation Fund legislation should be entitled to an amount of allowance that included all the adjustments that people who had been on the new scheme since 1985 had received. 
I think it was unnecessary to strike out subsection (6)(b) because that made it very clear what people were entitled to. Striking it out does not introduce great uncertainty as to what people are entitled to but on the face of the legislation it does not make it as clear as the original drafting did. The original drafting made it quite clear that they were entitled to an amount under this defined benefit scheme that included all the adjustments since the new schemes came into being. I personally think that striking the paragraph out was not the smartest move but Parliament in its wisdom chose to support what the select committee had recommended. I questioned Dr Cullen on it and the Minister of Finance confirmed that deleting that paragraph did not alter the amount people were entitled to. All I say is that it is just a shame that on the face of the bill it is not as transparent as it was before. Most people who read clause 4 would not have a clue what it says. That is the provision that sets out I presume the amount of the annuity yet it is not transparently clear what that is. People reading it now will have to delve back to find out what Part 2 Part 5 or Part 6 of the principal Act is—it refers to all of them—to see how much they are entitled to. The original drafting made it much more clear. 
The passage of this legislation will be helpful for some people in New Zealand who have been missing out. It is unfortunate it has taken the Government as long as it has to get it into place. Members will note that the commencement date for the legislation is the day after the date on which it receives the royal assent yet the money required to be paid commences on 1 July 2002. The fact that it has been dragging for on so long does not mean to say people will miss out because the date is specified. It is just a shame it was not put through more rapidly because most members of Parliament do support this and it is timely that it be passed now.