Politics

Government dismissive of Super Fund pay concerns

Plans to restrict the pay of Crown entity chief executives could put New Zealand’s superannuation fund at risk of political interference, the board’s chairwoman has warned MPs.

The Government is standing firmly behind its plans, with State Services Minister Chris Hipkins dismissing suggestions the changes would effectively repeal existing superannuation legislation.

Guardians of NZ Superannuation board chairwoman Catherine Savage spoke to Parliament’s governance and administration committee on Wednesday about the State Sector and Crown Entities Reform Bill.

In February, the Government announced it would introduce the legislation to place greater constraints on the employment of chief executives in the state sector and at Crown entities.

The Super Fund has been the face of concerns about public sector pay, after it approved a 36 percent increase for former chief executive and new Reserve Bank governor Adrian Orr in 2015/16, against the recommendations of both the State Services Commission (SSC) and then-Finance Minister Bill English.

Savage told MPs removing final say over the appointment of a chief executive would undermine the board’s accountability, transferring risk to the Government.

“It also opens up the possibility of political interference and short-term decision making.”

To have people who aren't thinking through those cycles and out 10, 20, 30 years, it becomes difficult to manage the fund in that sense.”

Savage said it was “vital” that the board was able to operate at arm’s length from the Government, given the need to recruit the best executives available.

Suitable candidates were unlikely to come from New Zealand’s public sector, given the “truly global” nature of the role with 85 percent of the Super Fund’s investments being offshore.

Orr’s controversial pay rise had come after a long period with no salary increase, and a change to the fund’s bonus structure, Savage said.

Guardians board member Stephen Moir raised concerns about plans to restrict chief executives to a five-year term, saying the head of the Super Fund needed a long-term focus.

“We’re working in global markets which normally have a seven- to 10-year business cycle. To have people who aren't thinking through those cycles and out 10, 20, 30 years, it becomes difficult to manage the fund in that sense.”

Savage suggested the bill could amount to an implied repeal of of the NZ Superannuation and Retirement Income Act, which gave the Guardians wide range to invest in the fund without interference.

“We knew when we made these changes the impact it would have on the Super Fund, but we were very deliberate in that: our view is that we should bring the rules around salary setting into line with what we’d expect from the wider public service.”

Hipkins said he had not heard Savage’s submission to the select committee, but disagreed with her suggestion the changes clashed with existing superannuation legislation.

“I don’t accept that argument: I mean, we're talking about some wage restraint for the chief executive.”

He said the Government would wait to hear what came out of the select committee process, but he noted concerns about the Super Fund’s remuneration process predated the current administration.

Prime Minister Jacinda Ardern also held firm on the Government’s plans when asked about Savage’s concerns.

“We knew when we made these changes the impact it would have on the Super Fund, but we were very deliberate in that: our view is that we should bring the rules around salary setting into line with what we’d expect from the wider public service.”

Speaking to Newsroom after the meeting, Savage said the Super Fund board was “very cognisant of the fact the fund is there for the benefit of all New Zealanders”, but had to account for market factors when setting salaries.

She ducked a question about whether the Super Fund felt it had become a whipping boy, saying the board was focused on “managing the money we’ve got with the best possible staff and culture”.

The recruitment process to replace Orr is currently underway, with Savage hopeful a new chief executive would be appointed by June.

She would not comment on whether the Government’s plans had had a chilling effect on the quality of applicants, but said “of course candidates have seen that this bill is out there”.

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