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Tax incentives please

Tax incentives are being suggested as one way to promote retirement savings.

Wednesday, October 22nd 1997, 12:00AM

by Philip Macalister

The option of using tax incentives to promote retirement savings is starting to be talked about as a possible solution to the superannuation dilemma.
An overwhelming majority of people - some 83 per cent - want the Government to provide some form of tax incentive to encourage retirement savings, according to a survey done by ACNeilsen McNair for the Colonial group.
The survey, which was released yesterday, said only 13 per cent of respondents were opposed to tax incentives.

Periodic Review Group chairman Jeff Todd earlier told an AIC organised conference on superannuation in a post-referendum environment that there might be some renewed interest in tax incentives as an option.
"There hasn't been much said about tax incentives over the past few months but I sense there may be emerging in some quarters a renewed interest in that option."
Todd says six years ago during the consultation phase of the Todd Task Force on private provision for retirement there was less support for the group's tax incentive option than for its compulsory option.
He says tax incentives were not popular in 1991/92 as it was a time when these types of incentives and concessions were being stripped out of legislation.
"It seemed inappropriate to introduce incentives and concessions for retirement savings," he says.
Also the cost of tax incentives to the taxpayer is very high and they put added pressure on the budget balance.
Todd says such incentives primarily benefit those who have saved, and rather than encouraging non-savers to start.
Also it would be inevitable that people would switch savings into tax-preferred products, and savings levels may not necessarily rise.
Colonial General Manager of Financial Services David May says while there appears to be little support for incentives from Treasury, politicians or the Todd Report, the strength of the survey results shows quite clearly that New Zealanders prefer the carrot rather than the stick to encourage private savings.
"New Zealanders, by voting against compulsory superannuation, have shown they prefer to be in control of their own savings plans.
"In the light of this, maybe the Government needs to take a fresh look at possible incentives if it is serious about wanting people to save more for their retirement," he says.
 
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