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Local shares will benefit from Labour's plans

While there is strong opposition to Labour's proposed super fund, the scheme does have some benefits.

Tuesday, February 8th 2000, 12:00AM

by Philip Macalister

The majority of voters in SuperTalk's latest poll reject the Labour's proposed plan to develop a partially funded state super scheme.

In the poll (you can vote by clicking here) 60 per cent of people say they disagree with the proposal.

It seems that opposition is shared by most of the political parties. Labour's coalition partner, the Alliance, is yet to be convinced it's a great idea, and the Greens have expressed reservations about the scheme.

However, the proposal is getting support in some quarters. Actuary Jonathan Eriksen backs the scheme on the basis that the country is running out of time to develop a funded state super scheme.

"As a country New Zealand is running out of time to address the retirement savings problem. The baby boomers will soon be retiring en masse. Unless a solution is found in the next five years it will be difficult for a funded arrangement to be become mature enough to make a difference. For this reason we support Labour's proposed scheme."

A research paper by JB Were points out that there are some positive spin-offs from the scheme.

JB Were analyst Campbell Millar says Labour's fund will be large by New Zealand standards and it will be beneficial to the local sharemarket adding depth and liquidity.

He estimates that the fund would need to be (in today's dollars) between $80 billion and $130 billion if it was to achieve its goal of paying 40 per cent of the state-funded pension.

Millar doesn't advocate a position on the scheme, and he notes that the Government may have to phase in the Superannuation tax if the country's surpluses aren't big enough.

Should Labour be successful in getting the fund off the ground, Millar believes it may be sustainable.

"National tends not to change things where possible. Indeed, the policy debate is likely to shift from what to do about superannuation, to how best to run the scheme," he says.

"Debate may centre on whether individual accounts within the fund would be better."

This debate has already started as New Zealand First has offered its support for the proposal as long as it used individual accounts, rather than being one, big consolidated fund.

The requirement for individual accounts was a key feature of the RSS scheme voters overwhelmingly rejected in the NZ First inspired referendum.

  • To read JB Were's full Investment Strategy report on Labour's Superannuation Fund, visit the POLICY ANALYSIS section of SuperTalk.
  • To Have Your Say on the proposal go to the Discussion Forum
« Labour’s Superannuation Fund to become a major investor in New ZealandAMP & Good Returns launch superannuation website »

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