by Rob Hosking
Dr Cullen has promised measures to remove some of the disincentives for savings in New Zealand. However the only sure-fire measure likely in the Budget has already been announced.
That is the move to tax employer contributions to their employees’ retirement savings at the marginal rate, rather than the current flat rate of 33%.
That measure has been welcomed by the industry, but there is growing impatience with the lack of progress.
“Our feeling is that while this is a step in the right direction, it is a very small and tentative one,” says Investment Savings and Insurance Association chief executive Vance Arkinstall.
There is also the fear that the model of tax relief in this area that has been adopted is going to mean even more compliance costs for employers, he says. Association of Superannuation Funds (ASFONZ) chief executive Bruce Kerr is similarly keen to see more urgency.
“We’d like to see the issue of over-taxation extended to all people saving through employment related products and not just those confined to defined contribution schemes. The way the minister is currently talking, defined benefit schemes are going to be excluded.
“What really needs to happen though is that all the over-taxation of private savings should be removed.”
ASFONZ wants action in three other areas, says Kerr.
“We’d like to see the government being a role model for employment based superannuation – using the primary teachers’ scheme as a model and extending that further.”
There is an outside chance that Dr Cullen may provide some indication of how the state sector superannuation scheme, piloted by the primary teachers since last October, is to be extended to other government employees.
ASFONZ also wants an end to the “political posturing” around removal of the red tape involved in employment-based saving schemes. As Good Returns reported earlier in the week, New Zealand First has been holding up the Business Law Reform Bill, which removes some of the rules around such schemes. The issue may be near resolution – Commerce Minister Lianne Dalziel’s office reiterated again yesterday that a solution appears imminent.
Fourthly, ASFONZ wants the funding of the Retirement Commission – which was cut in 2001 - put on a more adequate basis.
Generally the savings industry is expecting more rhetoric and not much else in the Budget.
“We expect the government to signal its ongoing commitment to reinvigorating superannuation generally,” Arkinstall says. “But it will be a continuation of politicians telling us what they might do, but failing to put their intentions into concrete action.”
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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