About the Fund

History

“The Fund was established to provide a way for state sector employees to save for their retirement.”

The Government Superannuation Fund (“GSF” or “Fund”) dates back to 1948, when it was established to provide a way for state sector employees to save for their retirement. Contributors make regular contributions to the Fund and in return, on retirement, receive a defined level of income.

The GSF Schemes were closed to new members from 1 July 1992, except for persons who were eligible for membership through their employment with certain Pacific Island governments. Membership was closed to these persons in 1995.

There are currently some 68,000 members, made up of some 15,000 contributors, 6,000 deferred pensions and 47,000 annuitants. Since 1996, the number of annuitants has exceeded the number of contributors. It is expected that entitlements will continue to be paid by GSF for the next 60 years or so.

The Fund’s assets are insufficient to cover its projected liabilities, i.e. its commitments to pay future entitlements. This shortfall was caused primarily by previous governments deciding not to make employer contributions to the Fund during the term of contributors’ government service. As a result the investment returns on the smaller asset base of the Fund, combined with contributions from members and non-government employers, are not sufficient to meet the annual cost of entitlements to members. The annual shortfall in the cost of entitlements is met by a ‘top up’ from the government each year.

“The annual shortfall in the cost of entitlements is met by a ‘top up’ from the government each year”

Before the Authority took over in 2001, the Fund was invested entirely in New Zealand fixed interest securities. This kept investment risk to a minimum but it also meant that returns were lower than they might have been over the longer term had the GSF assets been invested in a diversified portfolio. This would have resulted in the annual cost to government of the ‘top up’ being higher than it might otherwise have been.