Levies set to be hiked
ACC levies are likely to go up because of low interest rates and higher inflation caused by Covid-19.
Despite the Crown entity’s investment fund returning more than 7.6 per cent and the scheme running a $414 million cash operating surplus for 12 months ending June 30, its board expects medium-term levy increases when the matter is tackled by the government next year.
The ACC anticipates levies will need to increase to reflect legislative and pay-rate, medical cost inflation, weekly compensation claim growth, and successive deficits from the decrease in interest rates.
Board chairwoman Dame Paula Rebstock told NBR it is too early to estimate how large levy increases will be given market volatility.
Levies are assessed every two years and changes are staggered over 10 years, so payees are unlikely to see a sharp increase.
ACC’s annual report states all levied accounts are forecast to have a shortfall in the 2020/21 financial year.
These accounts include the work account, which is paid into by employers, to cover work accidents, the earners’ account through PAYE for non-work accidents and the non-earners’ account, which is funded by the crown and covers all non-workers.
Others are the treatment injury account, which covers claims resulting from medical treatment, and the motor-vehicle account, which is paid for by vehicle levies and goes towards traffic-accident costs.
Interest rate falls have increased the valuation of the injury claims on ACC’s books – known as the outstanding claims liability or OCL – to $61 billion.
This contributed $5.7b towards ACC’s net accounting deficit of $5.9b for the year. The OCL is the expected lifetime cost of supporting all claims already made and extends out 100 years to 2120.
Rebstock, pictured, says the deficit is not a cash loss, but a revaluation of the future cost of claims.
“Strong investment returns ensure New Zealanders continue to pay less in levies for accident cover,” she adds.
“New Zealanders can be assured the net deficit will not impact our ability to cover injury treatment, rehabilitation and compensation costs today.”