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Financing New Zealand Superannuation

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    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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    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
    Contact details of provider: 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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    1. Eugene Fama & F. & Kenneth R. French, . "The Equity Premium."," CRSP working papers 522, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    2. James M. Poterba, 1998. "Population Age Structure and Asset Returns: An Empirical Investigation," NBER Working Papers 6774, National Bureau of Economic Research, Inc.
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    5. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
    6. John Heaton & Deborah Lucas, 2000. "Stock Prices and Fundamentals," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 213-264 National Bureau of Economic Research, Inc.
    7. Ravi Jagannathan & Ellen R. McGrattan & Anna Scherbina, 2001. "The Declining U.S. Equity Premium," NBER Working Papers 8172, National Bureau of Economic Research, Inc.
    8. John H. Cochrane, 1998. "Where is the Market Going? Uncertain Facts and Novel Theories," NBER Working Papers 6207, National Bureau of Economic Research, Inc.
    9. Ellen R. McGrattan & Edward C. Prescott, 2001. "Is the Stock Market Overvalued?," NBER Working Papers 8077, National Bureau of Economic Research, Inc.
    10. 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.
    11. John Woods, 2000. "Manual for the Long Term Fiscal Model," Treasury Working Paper Series 00/02, New Zealand Treasury.
    12. 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.
    13. Lindh, Thomas & Malmberg, Bo, 2000. "Can age structure forecast inflation trends?," Journal of Economics and Business, Elsevier, vol. 52(1-2), pages 31-49.
    14. Robin Brooks, 2000. "What Will Happen To Financial Markets When The Baby Boomers Retire?," Computing in Economics and Finance 2000 92, Society for Computational Economics.
    15. Peter A. Diamond, 1999. "What Stock Market Returns To Expect For The Future?," Issues in Brief ib-2, Center for Retirement Research.
    16. Meyerson, Noah & Sabelhaus, John, 2000. "Uncertainty in Social Security Trust Fund Projections," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 515-30, September.
    17. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Cowles Foundation Discussion Papers 719R, Cowles Foundation for Research in Economics, Yale University.
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