tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, March 29th, 10:40AM

Investments

rss
Latest Headlines

ASFONZ unimpressed by Kiwisaver initiative

ASFONZ caution that the workplace savings plan announced in this year’s Budget may have unintended consequences and reduce national saving.

Monday, May 23rd 2005, 9:27AM
The Association of Superannuation Funds of New Zealand (ASFONZ) says that the announcements on workplace saving in this year’s Budget are unlikely to help New Zealand or New Zealanders as a whole.

ASFONZ says that the proposed scheme might result in a modest increase in New Zealanders’ savings in the short-term but could just as easily have unintended consequences and reduce national saving.

John Melville, the chairman of ASFONZ said that the “KiwiSaver” compulsory, work-based superannuation scheme is an answer to an apparent retirement saving problem that the government has yet to define. Melville said that there is a lot of talk about New Zealanders’ supposed bad saving habits but the most detailed research done on retirement saving by the Treasury itself suggests that New Zealanders are, on average, slightly over-saving for retirement.

Melville said that, while it was good to discuss the advantages of New Zealanders’ saving through workplace schemes, it was important for ASFONZ to raise its concerns on the design of the KiwiSaver scheme, its implementation and the risks it posed for existing employer-based schemes.

ASFONZ thinks that, even if the government were able to make a case for introducing the KiwiSaver scheme, there are many practical issues that have to be dealt with. First, ASFONZ says that 2007 is too optimistic a starting date for the new scheme. “There are many important aspects which we have yet to start discussing, let alone resolve. The tax treatment and ‘look-through’ provisions for income have not been detailed, discussed or finalised.” The Budget signals the government’s intentions on these but there is much work to be done.

Melville commented it seemed illogical that, while signalling a desire to have a low fees approach to KiwiSaver schemes, the government is also proposing a look-through tax regime that will impose significant extra costs on such schemes.

As well, the KiwiSaver regime will present new challenges for administration, approvals, securities legislation and public information programmes. ASFONZ says that New Zealand has had previous experience of these changes. From the present standing start, ASFONZ thinks that 2008 is a more realistic implementation date. This would also align the change with the timing of the increase in income tax thresholds.

ASFONZ has real concerns that the effect of the compulsory opt-out KiwiSaver regime will be negative for existing workplace superannuation schemes. Melville said that, at the margin, some employers will simply close membership of existing schemes or even wind them up. With the government now seemingly setting the rules on private provision for retirement (as well as public), those employers will simply leave it to the government to do whatever it wants.

ASFONZ thinks it is unlikely that many existing schemes will convert to the minimum requirements of the KiwiSaver regime; nor are they likely to want to qualify as being exempt from the automatic enrolment requirements. The required conditions will probably mean unacceptable changes to existing schemes. This means employers will effectively need to run two schemes for new employees – one that they want to have and the other that they have to have.

All this will, in ASFONZ’s opinion, be negative for existing schemes and their members.

According to ASFONZ, the KiwiSaver scheme may also deliver bad business for providers with many savers’ accounts having just the opening $1,000 contributed by the government and a minimum three months’ contributions from the saver. “These small accounts will simply be uneconomic” said Melville. “The KiwiSaver scheme will not be helpful if it results in lowering standards and restricting diversity because of an unbalanced focus on achieving low fees.”

ASFONZ says there is overseas evidence that such forced offerings do not work. The “Personal Retirement Saving Account” (PRSA) in Ireland has been an expensive, dismal failure. With a workforce about the same size as New Zealand’s, only 19,000 employees had signed up to a PRSA as of 31 December 2003 despite the fact that nearly all employers were forced to offer it. That’s about 1% of the workforce. And, says, ASFONZ, there are huge, continuous tax incentives for Irish employees that put the KiwiSaver’s proposed $1,000 “sweetener” completely into the shade.

“We may get an increase in superannuation scheme membership,” said Melville, “but at what price? ASFONZ thinks that more could have been achieved through other approaches that would have involved much less bureaucracy and intervention. ASFONZ is in favour of workplace superannuation, however we think that employers and employees should be free to make their own decisions about what’s right for them. This government thinks it knows better than New Zealanders what they should be doing with their own money. That’s a shame.”

ASFONZ applauds the government’s move to spend money on financial literacy programmes. It also suggests that more work needs to be done on improving the securities legislation. “We would like to work with the government to make workplace superannuation schemes better for employers and members”, said Melville. “Workplace superannuation is a great idea but that does not justify forced provision on all employers.”

This is a media release from The Association of Superannuation Funds of New Zealand (ASFONZ)

« Women in Super supports workplace savings initiativesASB Group endorses Kiwisaver concept »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

News and information about KiwiSaver

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com