Govt sets savings example
The Government has kick-started the workplace savings market by announcing plans to set up a scheme for nearly 100,000 civil servants.
Thursday, November 6th 2003, 10:15AM
The scheme, a modern day version of the old Government Superannuation Fund (GSF), essentially provides civil servants with a pay rise.While membership of the scheme is voluntary, those who join will have their contributions matched on a dollar-for-dollar basis. Matching will be up to 1.5% of salary in the first year and 3% in the second.
It is estimated the scheme will cost $19 million in year one, and $32 million in year two.
A key difference between this – as yet unnamed scheme - and the old GSF is that members will have a choice of providers to use.
The government says employees “will be able to choose from a limited range of investment providers and investment funds that will be authorised to accept employer contributions.”
“It is likely that these providers will be selected via a competitive tendering process to be undertaken in November 2003.”
Although final details of the scheme are yet to be decided it is likely to include the following:
- The scheme will be voluntary for employees It is not linked to length of service so new employees will be eligible.
- It will be a defined contribution scheme
- It will be portable and transferable
- Administrative costs and fees will generally be paid for out of contributions. However, this will be subject to the terms of any existing arrangements, and any future negotiations within individual agencies
- Employer contributions will vest immediately to the employee's account
- All contributions (other than employees' "voluntary" contributions) will be locked-in until retirement (possibly subject to some hardship provisions)
- Employer contributions will be back-dated to 1 April 2004, subject to them being matched by employee contributions .
"It is important that the government - as a major employer - sets a good example in encouraging retirement savings,” he says.
The scheme has got support from various quarters including the Investment Savings and Insurance Association and the Retirement Commissioner.
"It is very encouraging to see such a positive approach to workplace saving. Employers and unions working together like this for the benefit of employees could also be a good model for the private sector," Retirement Commissioner Diana Crossan says.
"Most employees in the private sector do not have access to a scheme. I hope to see other employers taking the government's lead and provide staff with access to retirement savings schemes."
For full details of the announcement use the following links
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