Government Superannuation Fund - closure

In 1985 improvements to the GSF general scheme allowed people to retire at 50 if they had at least 10 years’ service, did away with compulsory membership for new entrants and adjusted pensions in line with CPI.

This suggested that the scheme had a good future, but membership was declining, from 60% of those eligible in 1982 to 25% in 1990.  Only 13% of eligible women belonged compared to 35% of eligible men reflecting the disadvantage of a defined benefit scheme for those (mainly women) who had broken service.  

The State Sector Act had already brought state employees under private sector employment legislation and concerns were growing about the government’s ‘unfunded liability’ for GSF benefits (estimated at $8 billion in 1988) because benefits were paid out of current taxation revenue, rather than being collected in advance.  The National government decided to close the scheme from 1 July 1991 and establish defined contribution schemes for individual departments, but the PSA and other state unions successfully lobbied to have the period extended until 1 July 1992. Changes to the taxation of superannuation schemes and cuts in PAYE tax rates had also led to cuts to the level of GSF benefits in 1990 to reflect those changes.

Departmental provision of replacement schemes was mixed and over a decade passed before comprehensive provision was re-established.



Source: Neill Atkinson Rewarding Service: A History of the Government Superannuation Fund, UOP, 2002

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