Govt may create workplace savings product
A group being set up by Finance Minister Michael Cullen to look at encouraging savings may focus on adapting the Irish model for New Zealand.
Tuesday, March 30th 2004, 6:55AM
by Rob Hosking
The new group will “look at the design of a work-based savings product,” Cullen said in a recent speech.
His office told Supertalk that the new group would have “quite a narrow focus – not as broad as was suggested by the Periodic Report Group”, and also that Cullen “wants to take action relatively swiftly this year”.
The task of the new working group will be to develop a “practical product which can be the focus of encouraging savings.”
In his speech, Cullen spoke warmly of the work which emerged from the Insurance Savings and Insurance Saving New Zealand Forum last July.
The keynote speaker at the forum was Irish Pensions Board chief executive Anne Maher – and it was noted that Cullen took particular interest in her speech.
The Irish superannuation system also features a large government fund very similar to Cullen’s New Zealand Superannuation Fund, which, like the New Zealand model, is aimed at partly pre-funding the baby -boomers' retirement.
On top of that, they have set up individualised private savings accounts designed for the workplace.
The system takes a balanced investment approach, Maher told the conference, and the government gradually phased in making it mandatory for employers to offer the scheme.
It is not compulsory for people to join the scheme: however there are tax advantages in doing so. These include making the schemes exempt from taxation until they are drawn on - an ‘EET’ model, instead of New Zealand’s ‘TTE’ method.
Cullen has in the past talked of adopting a ‘TET’ model for New Zealand, and would probably not want to go the full ‘EET approach of the Irish.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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