by Rob Hosking
Help for employers offering access to superannuation schemes appears likely in next month’s Budget.
The government has promised a strong emphasis on savings in the May 19 package, including policy announcements based on the workplace savings group report of last year.
That report, headed by former Council of Trade Unions economist Peter Harris, recommended making it mandatory for employers to offer access to superannuation schemes as part of every employee’s remuneration.
One of the practical difficulties in that report’s suggestions was that there was no incentive for employees to join: a few “top ups” were suggested, but there was no tax break and – more importantly – it was left up to the individual employer as to whether they top up the employees savings with additional payments.
Research into the take up rates of the State Sector Retirement Savings Scheme, which was launched last year, shows that the biggest drawcard was the employer subsidy.
Public servants get a 1.5% top up, going to 3% in July. Effectively public servants get a pay rise if they join the scheme.
It appears work is under way to provide employers with an incentive to pay a similar sort of top up, although whether that is through the tax system or some other means is not yet clear.
A Treasury report released to Good Returns under the Official Information Act shows officials are working on assistance to employers.
“We are proposed a ‘helping hand’ mechanism particular to employer based schemes,” the report says.
The rest of the passage is blanked out as “details of proposal are still under consideration by the government.”
Although Finance Minister Michael Cullen has appeared to rule out any compulsion and any tax breaks his more recent words have been much more subtle than that. In a series of virtually identical speeches to regional businesses last week Cullen indicated the Budget will unveil a savings package which “does not rely too heavily on either the notion of compulsion or the manipulation of the tax system.”
That appears to give him more room to move on both tax and compulsion than many might expect.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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