National finally starts developing super paper

A National Party policy taskforce on superannuation shows that the party's thinking is broadly in line with the Government with one major exception being on the issue of prefunding the state pension.

The taskforce, chaired by former party president Sir George Chapman, was established last year to help develop policy in the area of superannuation. The report is not National Party policy, but a starting point for policy preparation.

On the prefunding issue the taskforce says National should oppose the idea because it will only provide 14% of the current cost of superannuation at its peak in 2040.

"It is hard to escape the conclusion that the Labour/Alliance Government is playing a confidence trick on voters by proposing a flawed long-term scheme for short term political purposes," the report says.

It argues prefunding won't work because historically the New Zealand government hasn't run surpluses of more than $2 billion very often, and that there is a risk government's may intervene over how the fund is invested.

The report also shows how out of touch the last National-led administration was with its members on superannuation.

In the development of the policy paper National surveyed its regional policy committees to include their input. While there was a wide range of views on many of the questions, there were very firm and widely held views on two crucial issues.

Firstly the "large majority" of committees believed NZ Super at current levels was "adequate and fair." Also, a "large majority" supported the pension being universal, as opposed to being subject to income and asset testing.

Thirdly there was "virtually unanimous approval for tax relief on private savings for superannuation."

The paper recommends that National should promote a superannuation policy based around the recommendations of the earlier Todd Taskforce, namely a mix of voluntary private provision and public provision.

National says: "the Labour/Alliance government is pursuing a different course to that recommended by the Todd Report and deciding on a scheme to partly pre-fund superannuation has made superannuation an election issue which seems certain to divide the country."

These comments are incorrect in that the government is pursuing the public/private mix put forward in the Todd report.

Also it supports the three tiered approach of a basic public pension, workplace superannuation and voluntary provision.

Labour is addressing tier one with its prefunding proposal which includes keeping the pension as a universal entitlement. Finance minister Michael Cullen said last week at an ASFONZ breakfast that the government is keen to fix tier two and make it easier for workplace super schemes, and it is addressing tier three mainly through a review of the tax system and the possible introduction of incentives for retirement savings.

National's policy paper says that tier one, NZ Super, is sustainable for the next 10 years and should be maintained by an incoming National Government.

It says employers should encourage employees to make savings to managed funds by voluntary deductions from salary and wages.

At tier three it says tax incentives should be provided for long-term contractual savings.

The major difference between National and Labour at the tier one level relate to funding. National's policy paper recommends that the government should reduce its debt to zero by 2015, while Labour says it will keep debt down but will save the surpluses to prefund future NZ Super costs.

On the tax incentive front Labour favours TET versus National which argues in its paper for ETE.

National also recommends that New Zealand follows Australia and provides senior citizens with a card that gives them benefits.