Report card on superannuation released
The Periodic Review Group supports the status quo but is proposing a number of important changes to improve the savings environment in New Zealand.
Friday, December 19th 2003, 9:00AM
The group says, in its report which was released this morning, that "the current system of voluntary private provision and a universal pension is working reasonably well for the currently retired and those approaching retirement."
However it isn’t so sure about those further out from retirement.
It says the picture isn’t particularly clear in this area as it is hard to measure the impact on their savings habits.
Adding to the haze is the fact that people in these cohorts have quite a different lifestyle to older people.
For instance older people generally live in a debt free home, they get the state pension, which is essentially an annuity, and have a little bit of their own savings.
The report says there are a number of risks facing the superannuation regime and the ability of younger people to accumulate assets. For instance they higher debt levels, student loans, they are older when they have children and potentially fewer of them will have mortgage free homes.
The Periodic Review Group, which has spent the past 12 months looking at superannuation in New Zealand, also isn’t proposing a compulsory savings scheme nor tax incentives.
"We conclude that there is not a strong case for using tax incentives to increase private provision."
It says there is little support for either of these. If the government wants to introduce tax incentives they should be aimed at low and middle-income earners.
It is unclear at this early stage what the government will adopt out of the report. However, if it chooses to adopt many of the recommendations the Retirement Commission is going to end up being a far busier body.
The report suggests the commission should take on a bunch of new jobs and extend its education and information services.
Among the jobs is the idea that it should extend its services to providing the public with "methodologies to enable people to compare and assess savings products and advice."
This may go as far as providing advice to consumers on either a face-to-face basis, or over the telephone.
The PRG says that six years between reviews is too long.
It says that by the time the next review comes around in 2009 "the advance guard of the ageing baby boomers will be entering their 65th year. Thereafter the growth in the numbers of those aged 65 plus will be rapid."
The PRG recommends an on-going work programme be established to keep an eye on what is happening.
It suggests that the Retirement Commission establish and manage funding for an advisory group to create a mechanism for stakeholders to provide comment and input into the work programme.
The PRG is keen on expanding workplace savings schemes. A key recommendation is that a Work-based Savings Group (WSG) be established to develop an agreed approach to promote work-based savings by the end of 2004.
This group would focus on a number of things including the provision of education through the workplace for employees, minimising regulatory and compliance costs, help with scheme design and best practice, provide training and resource support for employers and unions and encourage the take up of schemes.
For more on the PRG, what it is recommending, reaction and to download your copy of the report go to www.supertalk.co.nz
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