Babyboomers cry out for less tax on retirement savings

AMP makes its submission on the Bill to the Select Committee today

Thursday, April 26th 2001, 1:09PM

New Zealanders, particularly babyboomers, would definitely be encouraged to save more for their retirement if they paid less tax on their superannuation savings, AMP Financial Services told the Finance and Expenditure Committee today in its submission on the New Zealand Superannuation Fund Bill.

"Early returns for AMP's latest 'Superwatch' research shows that more than 80% of all people surveyed say that a favourable tax regime would encourage them to save more for their retirement.

"We think this is a significant proportion and felt it was important to release this information early to the Committee. As well as the issue of funding Government-provided services, there is a major need to look at the overall retirement savings framework," says John Drabble, Managing Director AMP Financial Services.

Consistent with AMP's Superwatch research conducted last year, 92% surveyed currently believe they need to save in addition to Government-provided superannuation despite the announcement of the Super Fund.

"People recognise the need to save, they believe they have a responsibility but something is holding them back from taking action. A more favourable tax environment might well be the circuit breaker that is needed."

Mr Drabble together with Linda McCulloch Head of Superannuation Strategy, told the Committee that New Zealand requires an overall framework that encourages New Zealanders to make the additional provision for the retirement they want.

"So far, Government has provided no framework to accommodate private or workplace forms of retirement saving," he says.

AMP made an individual submission as the leading player in superannuation and New Zealand's largest fund manager.

"On the positive front, this Bill has the potential to provide New Zealanders with greater confidence that they will receive a pension at present levels when they retire. We are also encouraged that the fund will be commercially managed at arms length.

"However, we note that the Bill proposes a different tax treatment than the Treasurer is discussing for private superannuation schemes," Mr Drabble says.

As a way forward, AMP supports the internationally recognised three-pillar framework for retirement income endorsed by the OECD comprised of:

Pillar 1: Safety-net age pension

Pillar 2: Workplace superannuation, and

Pillar 3: Voluntary superannuation

"No New Zealander would wish to see a parent or grandparent retiring in poverty because government had not actively encouraged them to think ahead. New Zealand is out of step with countries that it measures itself against, which do actively encourage people to think ahead with a three-pillar policy with appropriate incentives," says Mr Drabble.

"The three-pillar approach could help the vast majority of New Zealanders to meet their responsibility to save. We would look forward to working with Government to develop an overall solution," says John Drabble.

About AMP
AMP is an Australian-based international financial services business, providing wealth creation and protection products and services to around 9 million customers worldwide. Principal activities include retirement savings, funds management, life and general insurance, financial planning and banking services. AMP operates in 14 markets around the world with a significant and efficient domestic presence in its three home markets of Australia, New Zealand and the UK. AMP has more than 20,000 employees worldwide, manages assets of approximately $280bn and has a market capitalisation of approximately $20bn.

Early returns for AMP Superwatch research
[Conducted January-April 2001]

AMP asked: The government Super Fund is the fund the government proposes to establish which will partly pay for the rising costs of NZ Superannuation in the future. Given that this Super Fund seems likely to go ahead, do you believe you still need to save in addition to this for your retirement?

		Income		Age
Need to save in addition to super	% Total N=414	% <$50 KN=	% >$50 KN=	% 18-34 N=149	% 35-49 N=140	% 50-64 N=88	% 65+ N=37
Yes	92	88	94	93	96	90	76
No	5	9	3	3	3	9	19
Don't Know	3	3	3	4	1	1	5

AMP asked: If less tax was payable on the money you saved for your retirement, would that encourage you to save, or save more for your retirement?

		Income		Age
Less tax encourage saving for retirement	% Total N=414	% <$50K N=	% >$50K N=	% 18-34 N=149	% 35-49 N=140	% 50-64 N=88	% 65+ N=37
Definitely would	61	54	68	52	66	73	51
Probably would	25	29	23	28	21	19	38
Might or might not	4	5	3	5	3	2	3
Probably would not	6	6	4	10	4	3	0
Definitely would not	3	4	2	2	4	1	3
Don't know	2	3	1	2	1	1	5
Mean (out of 5)	4.4	4.3	4.5	4.2	4.4	4.6	4.4