The NZ Super Fund was forced to justify a rapid increase in bonuses paid to staff last year, with the amount paid in bonuses increasing by 50 per cent in just a year and one staff member receiving a $550,000-$560,000 bonus - the highest paid since at least 2018.

Prior to that, the largest bonus paid by the Fund was a $355,000-$360,000 bonus paid in 2019. In 2020/21 the top bonus was a relatively miserly $320,001-$325,000.

But by 2021/22 six staff were earning bonuses larger than this, including four staff who were earning between $355,000 and $560,000 in bonuses.

Questions from Parliament’s Finance and Expenditure Select Committee revealed the figures, which showed the total amount paid in bonuses increasing from $9.4m in 2020/21 to $16.2m in 2021/22.

In total 190 staff were paid bonuses (up on 163 the year prior), with 58 people being paid more than $100,000.

Guardians of the NZ Superannuation Fund board chair Catherine Drayton told the committee that a major contribution to bonuses was the fact that the fund had performed better than its benchmark over recent years.

Even in years like 2021/22, when the markets performed poorly, the fund performed better than its benchmark.

“A major contributor to bonuses is whether the fund has performed better than its benchmark.

“To put it very simply if the market is hot and the tide is coming in and we do better than the tide coming in, then there are bonuses.

“If the tide is going out and the markets are underperforming, if we do better than the underperforming market then we also give bonuses,” Drayton said.

National’s Simon Watts, who sits on the committee, told the Herald that “questions need to be asked” about the quantum and scale of the bonuses.

“In the context of cost of living crisis and the fact Kiwis are doing it hard there needs to be a pretty robust rationale of why people are being paid six-figure bonuses,” Watts said, noting that the figure and the number of people receiving bonuses was far higher than in previous years.

“This scale and quantum has not occurred in the past,” Watts said.

Drayton said she was “very confident” in the bonus system.

“The bonus system works across a four-year period and that is to reflect that we are a multi-generational fund,” she said.

“The previous year - not this year that we are talking about - was our highest ever fund performance and that contributed to a bonus.

“Last year saw a negative return but nonetheless we performed $4.5b better than the market. So there were components contributing to the payout,” she said.

The 2022 annual report had the size of the fund at $55.72b, with a return of -6.99 per cent that year, which was $4.5b higher than the Fund’s benchmark. This reflects the fact that while the fund’s return was negative last year, it performed better than the market.

Drayton told the Herald that payments were “higher” reflecting the “excellent performance of our investment strategies over the applicable four-year period.”.

She said that targets over four years were “exceeded” which resulted in “higher payments which are catching up payments not made in previous years in the four-year period”.

“The four-year rolling average used to incentivise appropriate risk-taking reflects the Guardians’ focus on long-term performance and smooths out the impact from extreme positive or negative market shifts.

“If we are unable to attract and retain the very best people in the highly competitive investment sector, then the taxpayer will miss out when the Fund is unable to achieve the best returns,” she said.