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'Pay as you go' ACC model short sighted – Banks

ACT leader John Banks says pay-as-you-go for ACC may save money now but future generations will have to pick up the tab.

ACC is now a fully funded model whereby the corporation builds up enough cash reserves to cover existing and potential future claims.

Labour is advocating a return to pay as you go, which means ACC only needs enough income to cover a year's worth of claims, plus a little extra for unexpected costs.

The plan would see levies go down by 20% to 25%, Labour says.

However, Mr Banks says claiming the pay as you go model would reduce levies is a false economy.

"The costs remain the same, but its tomorrow's levy payers that are forced to pick up the tab," he says.

The model does not adequately factor in the risk that some people's injuries require lifetime support from ACC, meaning the costs are transferred to future generations of levy payers, Mr Banks says.

"The best strategy is to open up ACC to real competition so customers can punish bad service by voting with their feet."

National is not ruling out abandoning the fully funded model, with ACC Minister Judith Collins saying "no decisions have been made". 

More by Caleb Allison

Comments and questions

As I understand it ACC has a mandate to extract enough levies to build a $10 billion reserve. They have lost nearly $2 billion on investments but no worries they can keep stealing off employees and employers because they are protected by legislation . Uruaguay Farms for example.
We desperately need a new focus of compensation only for workplace accidents and bring in the competition. ACC is not a welfare unit.

Uruguay Farms?? please enlighten?

Uruguay farms is part of ACC investment ,Whoosh is another. My point, is it wise to extract funds by force from business or is NZ better off by leaving as much funds as possible with business.
Even if ACC reached a position of self funding for compensation claims it would be used for the tax coffers and not to reduce or eliminate levies.

Always enjoy your punchy accurate comments.

Uruguay farms is but a small percentage of FUM. A better perspective is overall returns. 9.94% p.a. compound over 15 years is a fantastic outcome by any measure.