NZ Super loses $3.3 billion a year

Guardians of New Zealand Superfund confirmed a pre-tax loss of 6.99% after expenses for the financial year ended 30 June.

Monday, October 31, 2022, 10:00 AM

Eric Frikberg

This was primarily due to the decline in international markets in the second half of the financial year.

This reduced the value of the fund from $59 billion to $55.7 billion, a decrease of $3.3 billion.

This figure in the annual report reflects projections previously made by the NZ Super Manager.

About the fall, the report said global equities fell almost 16% in the June quarter, following a 5% drop in the March quarter. The bond market also fell.

Despite this, parents remain positive overall.

“In the short term, growth assets such as stocks can experience significant price volatility,” they wrote.

“However, in the long run, the Fund’s exposure to market risk is expected to pay off in the form of returns that are higher than the cost of the government’s contributions.”

They cite Treasury Department projections that the fund will be worth $150 billion by the mid-2030s, when it will start paying for biweekly pension payments.

They add that by the mid-2070s, when the NZ Superfund is projected to peak, withdrawals and tax payments together will cover about 20% of the total annual net cost of a retirement pension.

Parents also say the fund’s overall performance still far exceeds the cost of government debt, making the government more willing to spend the money.

“Over time, the fund is expected to earn more investment returns than the interest it is paying on Treasury bills issued by the government,” they wrote.

“This will increase the royal family’s overall wealth and put the government in a better position to cover the costs of future old-age pensions.”

They also estimate that the fund has returned $34.6 billion more than it would have saved had the government repaid the Treasury bills.

In another positive trend, the report showed that a policy of not investing in sectors with bad records on carbon and other environmental metrics made no real difference to returns at this point in time.

And the long-term outlook was good.

“Over the next 50 years, based on the Treasury Department model, the size of the fund will increase from about 17% to 39% of GDP and the NZ Superfund tax paid to the King will increase from 0.1% to 0.6% of GDP. ” wrote The Guardian.

50% of the investment is in North America, 17% in Europe, 15% in New Zealand, 4% in Japan and the remaining 4% in Asia.

tag: NZ supermarket

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