100% COLA

[At the 2016 Council, it was agreed that the only avenue availabe to pursue this issue is through a Petition to Parliament. The Board has set up a working group to prepare a petition for presentation in 2017].

One area which we have been attempting to address is the application of cost of living adjustments in a fair and equitable manner to all GSF and NPF annuitants. We believe that the present situation seriously affects a small group of annuitants, many of whom are elderly women who can least afford to be disadvantaged.

Since 1969 there has been a gradual move towards indexing GSF annuities against inflation. This was done in negotiation between the Government on behalf of the Crown, and the state sector unions on behalf of contributors. The major moves were made first in 1969 when contributors obtained a 60% initial CPI adjustment. This was increased to 70% of CPI in 1975, and in 1985 annuitants who did not withdraw from the settlement received the full 100% adjustment.

That left however the pre-1985 retirees short of the full adjustment and their annuities continued to be eroded by inflation. Following promises by both Labour and National that this anomaly would be rectified, a further change was made in 2006 to bring the indexation for this group to 90%, and legislation supposedly completing the process to ensure that all annuitants got the full adjustment was passed in 2009. We say supposedly, because a change in the formula for calculating the final adjustment differed from the previous four adjustments, meaning that the final adjustment did not achieve the 100% cost of living indexation that was intended and erosion of annuities of pre-1985 retirees continues. The new formula indexes the index, not the annuity.

The 2009 legislation was a complete derogation of the political commitments given to our Association over the previous two decades which extend back from Dr Cullen to Ministers Wyatt Creech and Peter Gresham in the early 1990s. Those commitments to full 90% and then 100% indexation of CoLA were made consistently, and were unequivocally given by Ministers in terms of the then existing legislation. That this commitment should be radically changed in the 2009 Amendment without consultation, where a changed formula gave a progression from 90% to under 91% actual indexation, can only be described as a travesty of public policy.

A fair resolution would not have been costly. The cost of the full increase of CoLA Indexation from 90% to 100% would have been fully known as it was comparable to the cost of the increase in 2006 from 80% Indexation to 90% indexation. Given the ages of those affected and their certain reduction in numbers since 2008, the cost would now be much less and will continue to diminish.

In summary, the problem of the erosion of Government Superannuation by inflation was recognised and given partial compensation in 1969. In 1972 a Government commissioned report noted that the erosion of Government Superannuation (even with partial indexation) was unfair and iniquitous. Thus in 1985 all existing contributors had the opportunity to receive 100% Indexation of CoLA. The need to apply this to those already retired was recognised and repeatedly promised. That the final step should be severely minimised by using a new formula for calculating 100% from 2009 breaks long standing promises.

It is disappointing to our Association that the current government feels unable to make changes to this legislation. We continue to submit that the costs of doing so would be small compared with the goodwill of restoring long-standing and unequivocal government commitments to provide full 100% indexation of CoLA to pre 1985 retirees.

(The Hansard transcripts of the First, Second, and Third Readings of the Government Superannuation Fund Amendment Bill 2009 can be viewed by clicking here.)

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