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House of Representatives
4 March 2003
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Government Superannuation Fund Amendment Bill (No 2) — Third Reading


Government Superannuation Fund Amendment Bill (No 2)

Third Reading

Hon Dr MICHAEL CULLEN (Minister of Finance) : I move, That the Government Superannuation Fund Amendment Bill (No 2) be now read a third time. This bill is not exactly long and complex. It is very short and rectifies a situation that many people have come to regard as inequitable, in that under the pre-1985 superannuation schemes, a remarrying spouse loses her—and in all cases it is the woman in that position—right to the half-pension she inherited from her former husband. In many respects, that is quite contrary to the present understandings about marital property and the inheritance of that marital property.

There was a slightly cheeky reference in the committee to the length of time the bill has taken to be passed. Before Ms Wong gets carried to far along that track, I might remind her that the Government Superannuitants Association asked the previous National-led Government many times in the 1990s to pass this legislation, and was consistently refused by that Government. Indeed, the member might recall her Government actually voting against a member’s bill by Jill White that was designed to do just that. It is this Government that has been responsible for bringing in this legislation.

The cost of the changes in the bill also includes a change affecting a very small number of children. As one can understand, we are talking about the children of somebody who died under the pre-1985 schemes, so we are getting on a bit in terms of what is going on in that respect. Only 19 such people also get an inflation index allowance from here on, as opposed to the frozen allowance they had previously. Those are significant changes. The first will make life easier for a number of women, not all of whom are elderly.

One of the difficulties in calculating the costs has been working out what the age structure—and therefore the likely survival times—of those widows is. The rough cost is between $2 and $2.5 million a year, although personally I believe it will be somewhat lower. My office has never quite agreed with the Government Actuary’s estimates on this. We believe that they estimated rather too many young widows, given whom we are talking about in that respect. But whatever it is, the entire cost is taken by the Government on the Crown account, because it is an additional cost to the Government Superannuation Fund that cannot be met out of the existing funds, and never will be.

We look forward to the passage of this bill. I know that there are some people who have taken action in anticipation of its passage. The good news for them is that the bill is backdated to 1 July 2002, so their anticipation will now be rewarded.

ROD DONALD (Co-Leader—Green) : I am very pleased to speak in favour of the third reading of this bill. Surviving spouses will be pleased to see it finally passed, as 800 of them have been materially disadvantaged by the unfairness of the current rules.

I would like to declare an interest at this point. I was advised on Sunday night that my partner’s mother is a surviving spouse who has remarried, and she was pressing me as to when we would pass this legislation. I think Michael Cullen has to declare an interest there as well, because my partner’s mother’s former husband was Michael Cullen’s teacher at high school—so there we have it.

The passage of this bill is being anticipated widely in the community, and not just by the 800 who have been materially disadvantaged by the unfairness of the current rules. There are, of course, another 12,000 spouses who can now remarry without disadvantage if they wish. I guess their only regret is that they will have to watch their former spouses’ hard-earned savings frittered away on the sharemarket.

PANSY WONG (NZ National) : This arrogant minority Labour Government has only itself to blame for the fiasco created during the Committee stage of this bill—a bill that is supported by all parties in the House. This bill recognises the changed circumstances in which people live in today’s environment. Widows and widowers of the contributors to the Government Superannuation Fund should not have their allowances forfeited simply because they remarry—and for a while there, I thought that Rod Donald was going to declare a conflict of interest. The bill also changes the allowance paid to children of deceased members who came under under the 1985 scheme, by replacing the prescribed amount with an inflation-adjusted allowance.

We were told that the number of widows and widowers affected is estimated to be only about 1,200, out of the 47,000 people who are currently in receipt of the Government Superannuation Fund pension. The number of children likely to be affected is even smaller. The National Party supports this bill none the less, because we believe it is important and significant to those affected.

Unfortunately, this bill—which is very positive and significant for those affected by it—has been overshadowed by the draconian measures used by the minority Labour Government to shut down debate during the Committee stage. First, the Chair at the time, Anne Hartley, would not allow the ACT party leader—

Mr SPEAKER: Procedural issues like that cannot be referred to. Decisions made by the Chair have to be accepted.

PANSY WONG: There was a very wide-ranging debate in the Committee stage on the title of this bill. Given that it is generic rather than specific, I think that many more members would have taken calls to challenge the title. In modern-day legislation, the title of a bill is designed to reflect more accurately its content and purpose. In this instance, a generic title like the Government Superannuation Fund Amendment Bill (No 2), has led to many debates, which have extended to the nature of the investment involving the Government Superannuation Fund. When the Government is introducing bills to this House in future, it should ensure that titles are more specific and reflective of their purpose, rather than being generic. In this instance, it has led to a 35-minute debate on Standing Orders.

The other issue is that during the Committee stage the Hon. John Tamihere replaced the Minister in the chair, the Hon Michael Cullen. That was rather unfortunate, because there were quite a few valid questions being asked, including one that the Hon. Michael Cullen has just provided an answer to—namely, the cost of this change. We were told that the cost is estimated to be between $2 million and $2.5 million. The Minister said it might be less than that, but the public and members of the various parties in this House were entitled to that information. Indeed, repeated questions were asked during the Committee stage, and John Tamihere was not able to—or was unprepared to—take a call and reassure us as to the cost of the changes.

This relatively short bill attracted only three submissions. One was from the New Zealand Law Society, which advised on some technical changes to ensure that the wording of one of the clauses was not confusing. The other submission was the endorsement from the Government Superannuitants Association. The third submission was from the National Council of Women of New Zealand, on whose behalf I have raised the question of the criteria by which an exception can be made for children above the age of 16 who might still be financially dependent.

The National Council of Women is an organisation all members should be grateful for, because it has taken great trouble—conducting research in its own time—to furnish submissions to various select committees on various bills. Although the council supports this bill in general, it has raised the issue of the age at which the children affected are classified as being financially dependent. The council stated that, nowadays, we are encouraging children to stay longer in the educational sector to equip themselves for a much more dynamic society in which education and skill are required to ensure that they secure more fulfilling jobs. It is a valid concern that children are now more likely to remain financially dependent beyond the age of 16. The officials’ answer was that a case could be made to extend the allowance to children beyond the age of 16, and up to the age of 18.

So a whole series of questions was posed to the Minister of Youth Affairs, the Hon John Tamihere, as to what those criteria were; how those children, or their guardians, could find out how to start the process, and who they could consult as to whether they qualified for that waiver. It was extremely disappointing that never at any stage when he was in the chair did the Hon. John Tamihere intend to take a call to furnish those answers, or to consult his officials. No matter how short a bill is, a Minister in the chair should really be answerable to the public, and should answer questions that have been validly raised by members of various political parties. The fact that the Hon John Tamihere was made to sit through the Committee stage, after being gagged by the Prime Minister for his indiscretion in speaking against his own colleague Steve Maharey, the Minister of Social Services and Employment, for the latter’s lack of action, should not influence his ability to stand up and answer to the public on a genuine question raised by the National Council of Women.

GORDON COPELAND (United Future) : I have no personal knowledge, of course, of just who is to blame for the long delay in the passage of this important piece of legislation. I must confess, too, that I have yet to develop an appetite for long debates during the Committee stage that relate to the technicality of whether a bill’s title is right or wrong. But I am delighted to know that the widows affected by this legislation will at last get the justice they deserve. In fact, I could not help but think of the story in the Gospels about the widow who persisted in battering an unjust judge who refused to give her due process for such a long time that he finally got fed up and gave it to her. After such a long passage of time, I guess that that is probably the way that the widows who are the recipients of this annuity will be feeling. I only hope that they feel that the wait has been worthwhile. United Future is delighted to see this bill at last pass though the House.

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.

DAVID BENSON-POPE (NZ Labour—Dunedin South) : I rise in support of the bill.

RODNEY HIDE (ACT NZ) : The ACT party rises in support of the Government Superannuation Fund Amendment Bill (No 2). This bill does overcome a longstanding anomaly in which a widow or a spouse of a civil servant who remarries loses the entitlement to which she or he would otherwise be due, simply by virtue of the fact that she or he is getting married. The ACT party agrees with every other political party in the House that that is anomalous, wrong, and unfair, and should be stopped.

The question then is whether it a principle that this House wants to apply generally. Imagine the situation that one is a widower or a widow, one is entitled to a New Zealand pension—not a Government Superannuation Fund pension; I am comparing it to this situation—one remarries, and by virtue of remarrying one loses one’s pension. I am sure members in this House will say that is impossible. They can understand that it was occurring before the passage of this bill, and that that is what this bill is designed to overcome, but, in fact, a New Zealander entitled to New Zealand superannuation who remarries can lose that entitlement. I look around the House, I look at Mr Cunliffe talking on the Prime Minister’s phone, and I see that he is dumbfounded by that statement. Michael Cullen and the Labour Government are supporting the fact that New Zealand pensioners who remarry can lose their pensions.

How can that possibly be? It works like this. If a New Zealander marries someone who is entitled to an overseas pension, that New Zealander is income tested. That is right. I have a case in my electorate of Epsom—I say “my” in the romantic sense of the word, in the sense of my emotional attachment to Epsom, which I know that the Māori members opposite understand—of someone who planned his or her life thinking that superannuation would be available, who worked away, reached the age of 65, went to get the pension, and was told by this Government that there was no pension.

Mr SPEAKER: That is outside the scope of the bill. This bill is the Government Superannuation Fund Amendment Bill (No 2). It is not about the New Zealand scheme. I refer the member to Speaker’s ruling 94/5: “Debate on the third reading is more restricted than it is on the second reading of a bill. It is limited to matters contained in the bill”.

RODNEY HIDE: The matter that is contained in the bill is that if a person remarries, as compared with what Mr McNair would call “living in sin”, his or her financial arrangement should not be affected. I agree with that. It is a bit odd that currently, if one is happily receiving a pension from the State, and one stops what Mr McNair would call living in sin, does the right thing by the lady, and gets married, suddenly, whack, one loses the pension. I know that Mr McNair would not agree with that, and I know that United Future would not agree with that. Actually, without the passage of this bill we are encouraging all pensioners to live in sin and enjoy each other’s company and comfort. If they do that, they will get their pension, but if they go along to the local church or to the registry office, or even if they get married in their own backyard by a marriage celebrant, and they say the magic words “I do.”, whack, they lose their pension. [Interruption] With the passage of this bill—as my good friend and colleague Mr Copeland is pointing out—that anomaly will stop. I ask members of the Government and members of the Opposition whether that is an anomaly that they agree should be stopped.

Pansy Wong: Yes.

RODNEY HIDE: Pansy Wong says it is. I go across to David Cunliffe, who is still enjoying himself on the Prime Minister’s phone.

Mr SPEAKER: The member knows that is out of order. The member will come to the bill or have his speech terminated.

RODNEY HIDE: I ask David Cunliffe whether he thinks that is an anomaly that should be stamped on. If a person is getting a pension from the State, as under this bill, and he or she gets married, does he agree that that pension should continue?

David Cunliffe: Tell us about the ACT offices.

RODNEY HIDE: David Cunliffe has not focused his mind on this bill and his support for it. It is quite odd, because we do have situations in New Zealand still—far more than just those under the Government Superannuation Fund, I have to report—where people get married and lose their pension. I would like to know whether the Labour Party, United Future, the New Zealand First Party, the National Party, and the Green party—and I will get to Mr Cunliffe, whatever party he wants to say he belongs to—think it is correct and right that someone who gets married loses the pension that he or she is entitled to if he or she is not married. I look across to Mr Copeland and Mr Murray Smith and I think they would agree with me that it is odd that people can live in sin and get the pension, but if they get married, no, they do not! Yet, for large numbers of New Zealanders, notwithstanding this bill, that is precisely the situation, as people coming to my office in Epsom have explained to me. I find that an anomaly.

This bill covers the Government Superannuation Fund, which, as members have pointed out, is not a fund sufficient to cover the contractual entitlements that civil servants have in respect of their pensions. Happily, it is closed off, but there still is a large tail. The last time I looked it was about $8 billion. The liabilities are about $8,000 million, and, from memory, the assets of this fund are between $3,000 million and $3,500 million. So the fund’s assets do not cover 50 percent of the liability.

Then we have the problem that the fund has lost $380 million of its value in 14 months. I said to a gentleman this morning, on my way here: “How do you feel about the Government giving money to Team New Zealand?”. He said: “Well, when you compare it to what it’s lost with the fund, I’d rather it spent the money on Team New Zealand.” The point about that money is that Mr Cullen says: “Oh well, that loss is just on paper.” Well, that is how money is recorded in the modern world. It is a real loss, and if that loss is not made up, it has to be made up by the taxpayer. That is the precise situation, and that is how it wags around—similarly with the accident compensation account, where the Government accounts.

I have to say that when we look at that situation and at the anomalies this bill is attempting to address, we find that there is some distance to go if this Government is to convince New Zealanders of the wisdom of a fund such as the New Zealand Superannuation Fund, which is managed on behalf of the Government. I would very much like the next Government speaker to explain, given its support for overcoming the anomaly of one’s losing one’s pension if one remarries, whether that is a general principle that the Government is prepared to support, because if that is so, there are many pensioners whom I could put it in contact with who are not in that situation.

Thank you very much, Mr Speaker, for your kindness in letting me speak.

  • Bill read a third time.