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Financing New Zealand Superannuation

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Author Info

  • Brian McCulloch
  • Jane Frances

    ()
    (New Zealand Treasury)

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    Abstract

    The New Zealand Superannuation Fund is being established as a means of smoothing out the impact on the rest of the Crown’s finances of the transition that will take place over the next fifty years to a permanently higher proportion of the population being eligible for New Zealand Superannuation, the universal pension paid to New Zealanders over the age of 65. This paper discusses the financial issues surrounding the determination of the contributions that the Government would be required to make to the Fund over time in order to meet this objective. The calculation of the required contribution rate is derived as a function of future expected entitlement payments, future expected nominal GDP, future expected investment returns, and the Fund balance. Estimation issues are discussed and the implications of volatility in investment returns are examined. Some issues in assessing long-term expected returns are addressed in an appendix.

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    File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2001/01-20/twp01-20.pdf
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    Bibliographic Info

    Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 01/20.

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    Length: 41 pages
    Date of creation: 2001
    Date of revision:
    Handle: RePEc:nzt:nztwps:01/20

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    Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
    Phone: +64-4-472 2733
    Fax: +64-4-473 0982
    Web page: http://www.treasury.govt.nz
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    Related research

    Keywords: pension fund; capital markets; investment returns; social security; retirement income;

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    References

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    1. John Heaton & Deborah Lucas, 2000. "Stock prices and fundamentals," Proceedings, Federal Reserve Bank of San Francisco, issue Apr.
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    9. Eugene F. Fama & Kenneth R. French, 2002. "The Equity Premium," Journal of Finance, American Finance Association, vol. 57(2), pages 637-659, 04.
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    13. Robin Brooks, 2000. "What Will Happen to Financial Markets When the Baby Boomers Retire?," IMF Working Papers 00/18, International Monetary Fund.
    14. John Woods, 2000. "Manual for the Long Term Fiscal Model," Treasury Working Paper Series 00/02, New Zealand Treasury.
    15. Peter A. Diamond, 1999. "What Stock Market Returns To Expect For The Future?," Issues in Brief ib-2, Center for Retirement Research.
    16. Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, 06.
    17. Lee, Ronald & Tuljapurkar, Shripad, 1998. "Uncertain Demographic Futures and Social Security Finances," American Economic Review, American Economic Association, vol. 88(2), pages 237-41, May.
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    Cited by:
    1. Palacios, Robert, 2002. "Managing public pension reserves Part II : lessons from five recent OECD initiatives," Social Protection Discussion Papers 33407, The World Bank.
    2. John Stephenson & Grant Scobie, 2002. "The Economics of Population Ageing," Treasury Working Paper Series 02/04, New Zealand Treasury.
    3. Christopher Ball & Michael Ryan, 2013. "New Zealand Households and the 2008/09 Recession," Treasury Working Paper Series 13/05, New Zealand Treasury.

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