SOS sent to Cullen

The Association of Superannuation Funds (ASFONZ) is sending out an SOS call to the Minister of Finance as its members struggle in the wake of last week’s announcements.

Thursday, August 31st 2006, 7:13AM
ASFONZ vice-chairman Jill Spooner says the decision to make tax concessions available in respect of certain employer contributions to KiwiSaver schemes penalises existing super schemes.

“Existing registered superannuation schemes that offer an employer subsidy will not be eligible to take advantage of the tax break,” she says.

The sponsors of such schemes who have done their utmost to foster a savings culture amongst their employees must be wondering what they have done to be cast adrift by a Minister who is aiming to improve the saving habits of New Zealanders.

Spooner speculates that the reason is because employer-sponsored schemes often allow access to accumulated savings prior to age 65.

“If this is the rationale, it would not be unreasonable for the tax concession to be given in exchange for a requirement to have emerging benefits retained in a scheme until the member attained age 65.

“I believe this would offer a workable solution for existing employer-sponsored schemes and enable them to continue the important role they play in the savings arrangements of hundreds of thousands of New Zealanders.”

Spooner said that, in the absence of such a lifeline, many employers would struggle to develop a rational solution that: met their employees’ needs, satisfied their statutory KiwiSaver obligations and involved the continuation of the existing scheme.

“I sincerely believe that, unless appropriate changes are made we can expect scheme closures. If this does happen the accumulated funds will, of course, be distributed to the beneficiaries. We can only hope that such funds are squirreled, or “KiwiSaved”, away, or are used to pay off debt. It would be a tragedy if a policy initiative designed to encourage savings in fact reduced the net wealth of New Zealanders.”

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