ING managing director, Paul Fyfe, says the announcements – while “long overdue” – are critical for the country’s financial future and will help change New Zealand’s acknowledged poor savings habits.
The key changes outlined in the Budget by Finance Minister Michael Cullen include the removal of tax on realised capital gains for domestically invested unit trust, superannuation funds and other collective investment vehicles.
“We’ve also finally achieved the ‘level playing field’ that has been sought for so long, whereby investors – particularly those on lower incomes – are no longer disadvantaged by having to pay a higher level of tax on their savings than they do on their income.”
Fyfe said that while the take-home pay of New Zealanders won’t change in the near term (unlike Australians who recently received tax cuts), the scope of tax changes announced today should see savings levels grow – and faster.
“Instead of a direct tax cut that would probably have gone towards meeting the more immediate needs of New Zealanders, the announced changes should flow directly into savings vehicles that will benefit everyone in the longer term.”
The other key development is the Government’s commitment towards the establishment of a workplace savings scheme designed to encourage those in paid employment to start or supplement a personal longterm savings account.
“ING has always supported employer-based superannuation as the easiest and most effective way for people to save, and numerous overseas models support this.“
Fyfe notes many of the questions raised by the initial Harris report have been addressed, but still more remain at the detail level.
However, he believes it represents a good start and a step in the right direction.
“Dr Cullen’s scheme has the added merit of allowing savings to be used towards a first home. While this is a departure from the traditional form of retirement saving, it recognises the more contemporary – and very Kiwi – approach to wealth accumulation. The upshot is that more New Zealanders will be able to accumulate a financial base to support their superannuation entitlement, be it through direct saving or buying a property.”
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