Higher Cullen fund costs add spice to super debate
Sunday, 7 June 2026
Vernon Small is a journalist and former Labour Government advisor.
OPINION: In the hurly-burly of Budget coverage, a significant issue can sometimes go through to the keeper, as most analysts and reporters focus on the immediate and the newsworthy.
So it has been with Finance Minister Nicola Willis’ press release announcing the need for big contribution increases to the New Zealand Superannuation Fund (NZSF), aka the Cullen Fund – the now-$91 billion nest egg set up to part-fund the cost of supporting older Kiwis.
The announcement was not a Government decision per se, because the annual contribution rate is set by a statutory formula. But it fundamentally changes the future shape of the fund, amid the increasingly heated economic and political debate about the sustainability of our superannuation regime.
Read More:
The winners and losers from changing the way we pay for old age
Nicola Willis reignites superannuation debate in post-Budget speech
The impetus for the increased contributions also sends a message to investors about the “toppy” level of world markets and the greater burden taxpayers will have to pick up under the current “pay-as-we-go” model that funds this year’s retirees' payments out of this year’s tax.
Of course, the numbers can bounce around a lot, and forecasts can swing either way.
The good news in this week’s financial statements for the 10 months to the end of April made that point in spades. Less than six days after the Budget was tabled, the deficit is tracking $3 billion below the level predicted on Budget night.
But for now, the Cullen Fund forecasts are all we have to go on. And they are concerning.
Warning. Many numbers follow.
A comparison with the previous year highlights the size of the revisions.
In the 2025 Budget, the track for Government contributions through to 2029 was for $61m in 2026, $4m in 2027, minus $32m in 2028 (that is, a small payback to the Government’s coffers) before a return to contributions of $63m in 2029.
Last week’s Budget maintained the $61m this year, (although that was diverted into the Elevate NZ Venture Fund which is also administered by the NZSF’s Guardians) but the rats-and-mice numbers ended there.
The new track will require the Government to kick in $562m in 2027, $600m in 2028 and $893m in 2029. This Budget added the 2030 contribution into the mix – a whopping $1049 million.
In total (including the new 2030 figure) that is $3.1 billion over four years, some $2.2b more than expected in Treasury’s half-year update in December. That’s roughly enough to fund another 20km of the Waikato Expressway. Or to gobble up the purported savings from planned cuts to the public sector. Or 275 years of food-bank funding. Or whatever else is your priority.
The increased contributions are capital investments, but the Government does not count them against its annual capital allowance. If it did, they would take up about 17% of the $3.5b allocated in each of 2027 and 2028.
But they do increase debt. And after this year’s “one-off” spike to $5.7b in the capital allowance Treasury warned that if it gets too high, “there is a risk that government debt as a share of GDP will continue to rise and never turn down, contrary to the Government’s fiscal strategy”.
The reasons given for the shift in Cullen Fund contributions include population projections and new (higher) inflation forecasts, which have increased the future cost of NZ Superannuation as a share of GDP.
But they also include a warning for long-term investors; a cut to 7.2%, down from 7.8%, in the NZSF Guardians’ assumptions of the fund’s expected returns “reflecting their view that with global markets at historically high levels, future returns will likely be weaker compared to recent years”.
Those lower returns mean less money to help cover future superannuation payments, hence the need for greater contributions if it is to meet its targets.
This takes us to the most far-reaching impact of the changes.
Under the new forecasts, the first withdrawals will be severely delayed to 2054 from the originally intended 2036. That’s another 18 years during which current taxpayers will have to foot the full bill for today’s superannuation payments. (In a way it’s worse, because as noted above, the first small pay-back of $32m was expected earlier – in 2028.)
And there is a spicy political dimension to the higher contributions.
It is another $2.2b Labour, other opposition parties and presumably NZ First must fit into their longer-term debt plans. They can't affect the track while they pledge to maintain current entitlements.
National and ACT are not so constrained, and a shift in entitlements would clearly affect the proportion of future super costs that the fund would cover.
Moreover, National under John Key and Bill English had no compunction taking “contributions holidays” to trade off higher future contributions and lower earnings by the NZSF against lower short-term borrowing.
Labour has long railed against those calls, and it is unlikely to contemplate them now given its reverence for former finance minister Michael Cullen’s plan.
In an election-year debate about the long-term cost of superannuation, the Cullen Fund and its earnings are set to be more than just a sidebar to this year’s Budget.
What do you think? Email sundayletters@stuff.co.nz. Please include your full name and address.