ACC stabilises rehab times but Government account only 48% funded

Tuesday, 3 December 2024

The Government will soon decide how much to raise ACC levies, but its own contributions are proportionally further in arrears.

ACC currently has less than the half the money put aside that it will need to fund the future costs of injuries that have already occurred and which will need to be funded directly from the Government.

Deputy chief executive Stewart McRobie told a select committee on Monday that its so-called “non-earners account” had dropped from being 84% pre-funded at the end of 2023 to only about 48% pre-funded at the end of June.

That was largely as a result of a court case that will increase the compensation entitlements of sexual abuse victims by about $3.5 billion.

The Court of Appeal ruled last year that abuse victims should be compensated for loss of earnings from the time they were abused, rather than only from when they sought treatment from ACC.

Finance Minister Nicola Willis said in October that the Government would not need to put additional money directly into the scheme to plug ACC’s overall $7.2b deficit.

But Labour’s ACC spokesperson Rachel Boyack said the scale of the shortfall in the non-earners account made that irresponsible.

“The drop from 84% to 48% is massive, and it was clear today from the chair of the board of ACC that there is a gap both in levy income and in the appropriation income,” she said.

“ACC may be advising ministers about what's needed in terms of the appropriation and I think that's appropriate.”

The state-owned insurer works on the broad principle that it should have investments set aside to pay the lifetime costs that it expects to incur from injuries that have already occurred.

That is to avoid those costs falling on future generations.

The investments to pay for work-related injuries are funded by levies on employers, while non-work injuries experienced by people in work are funded by other levies, such as payroll deductions.

But the Government meets the costs of claims from people who are not subject to levies, through the non-earners account.

ACC chair Tracey Batten told the Education and Workforce select committee that the vast bulk of the extra $3.5b in costs it was expecting to incur as a result of the Court of Appeal ruling fell into that category.

There have been growing calls for financial institutions including ASB and ACC to ditch investments in firms that profit from illegal settlements.

There was a gap between the funding ACC received both from levies and appropriation and the cost of claims, she said.

In a more positive development, Batten said the amount of time claimants were taking off work to recover from injuries had stabilised in the first five months of ACC’s new financial year, after deteriorating in the year to June.

“Improving rehabilitation performance is a priority for ACC and for our minister, and we're starting to see some really positive signs,” she said.

“This, in turn, will support our financial performance.”

ACC had $47 billion invested as of the end of June.

Head of asset allocation David Iverson said ACC, along with other large Crown investors, was reviewing investments in entities the United Nations believed were involved in Israel’s illegal settlement of Palestinian occupied territories.

“We've been closely working with New Zealand Super for at least 15 years. We can't obviously comment about any potential divestments we're likely to make, but we keep a watching brief on this,” Iverson.

“This is still an area of active discussion and review for all the collective Crown financial institutions.”

ACC had previously excluded some companies directly implicated in the occupation, he said.