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Govt admits it's seriously looked at compulsory super

Government ministers seriously considered compulsory superannuation as part of the business tax review.

Thursday, August 3rd 2006, 5:14AM

by Rob Hosking

Revenue Minister Peter Dunne told a Pricewaterhouse Coopers breakfast meeting this week that the payroll tax option, eventually rejected by ministers, included a levy for compulsory workplace savings.

“We considered very seriously how it might work, whether a reduction in tax could be traded off for superannuation and savings,” Dunne says.

The option would have been “somewhat similar to the Australian system”.

The numbers however did not stack up, he says.

The government has never before admitted it was looking at compulsory savings. The Australian-owned nature of most of the New Zealand funds management industry, as well as the obvious benefits for business, mean there is no shortage of advocates for a compulsory workplace savings regime here.

However the government has – until now – always highlighted the difficulties with such a move.

Finance Minister Michael Cullen has noted the Australian regime had its genesis in a particular set of circumstances, and in a Cabinet paper on KiwiSaver last year appeared to rule out compulsion.

KiwiSaver, although voluntary, requires all employers to offer it and also requires everyone to be enrolled, with the ability to opt out after 77 days. This could be easily converted into a compulsory savings scheme if there were ever enough support for such a regime.

Dunne notes that legislatively it would be simple – the opt-out clause in the legislation would simply have to be removed. “I’m not responsible for KiwiSaver though, and no decision has been made to go down that route (compulsion).”

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

« Maori Party not supporting KiwiSaverSome pain needed to get savings going »

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