The Treasury thought the employer subsidy would cost $48.5 million in the first full year if uptake was only 30%. That would have been in line with uptake of the teachers’ retirement scheme set up the previous year as a pilot for the wider state sector scheme.

For some reason the commission was allocated 26% less than that, but actual uptake has been 50% higher.

The State Services Commission received only $35.7 million to fund the subsidy this year and will have to go back to Finance Minister Michael Cullen to seek a considerable top-up.

The Treasury estimated that the employer subsidy would cost $67 million if the uptake was 50%.

That may prove to be understated as the estimates are based on average incomes. However it is likely that the profile of those putting money into the scheme will be skewed towards the more highly paid public servants.

When Treasury originally made these estimates it also warned that the scheme would face upward pressures, due to expected salary growth of 5% within the public sector, plus a planned increase of the employer subsidy from 3% to 6%.

The State Services Commission is paying the employer subsidy for the first couple of years of the scheme but from July 2006 the individual government departments will have to meet the cost out of their own budgets.