Govt underfunds savings message
Official papers show funding the Office of the Retirement Commissioner hasn't been a high priority for the Government, despite the office's success and the need for financial education.
Tuesday, June 19th 2001, 11:11PM
Official papers show that during the latest budget round the Government considered disestablishing the Office of the Retirement Commissioner (ORC), and it also tried to get the private sector to pay for all of the office's educational programme.
The final result of the round was that the Government cut the office's funding by 30% from $4.78 million to $3.32 million, thus forcing the ORC to reduce its education and awareness programme.
Adding to the office's woes is the total withdrawal of private sector which used to run at $1 million a year.
Reports prepared for Social Services minister Steve Maharey by the Ministry of Social Policy, in conjunction with Treasury and the ORC, argued that public education on retirement issues was important for the Government.
They argued that education will lead to higher quality private savings, thus there will be less pressure for increases in state provision, less fiscal costs for income-related supplementary assistance.
Just as importantly, "it will help overcome any risk that the public will perceive the proposed pre-funding scheme as a justification for not making private provision".
"In New Zealand's unique situation of not having compulsion or tax-incentives, a commitment to education is a strong indication from Government of the importance of private voluntary savings."
They were also surprised there was no requirement for New Zealand schools to undertake studies in financial literacy, especially since overseas studies have shown they are very effective.
Officials explored three options for future funding of the ORC's education campaign.
While the minister initially supported the idea of providing the office with baseline funding, plus $2.8 million for its public education campaign, he later tried to form a "partnership" with the industry, whereby it paid for the campaign.
Officials also considered options such as imposing a compulsory levy on the industry, or setting up a self-run levy system through the Investment Savings and Insurance Association to fund the ORC, like the industry does with the Insurance and Savings Ombudsman.
For more on How the Government screwed the ORC go to the Features section
You can read Philip's blog here: http://www.goodreturns.co.nz/blog/
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