Super people in rolling maul
SuperTalk editor Philip Macalister reviews what has happened in the superannuation area in 2001, and concludes progress is being made - slowly.
Saturday, December 22nd 2001, 10:49PM
If you use the analogy that superannuation is a political football you'd sum 2001 up like this. Labour has possession of the ball and it has been going forward in a rolling maul - albeit very slowly.
Progress is being made.
Some spectators may doubt that progress is being made, but there are a number of events this year which have been positive. In fact when you tally up all the plays during the year you'll find there are more positive ones than negative ones.
The first point is that New Zealand now has a Finance Minister in the form of Michael Cullen, who is clearly quite passionate about doing something about superannuation.
What's more he is prepared to push it up the Government's work agenda. He has taken the time to understand the issues and he has good dialogue with the funds management industry.
His willingness to learn about the issues and consider them puts him miles ahead of all his predecessors in the finance portfolio over the past decade.
You may not agree with all his calls so far (eg: partially prefunding NZ Super) or you may, quite rightly, consider he takes too long to make decisions.
The point though is that New Zealand finally has a minister who is interested in what is arguably one of the biggest, and most far-reaching policy issues facing the country.
Clearly there is divided opinion on the decision to establish a multi-billion dollar, state-run fund to help pay for some of the future costs of NZ Super.
In one corner are the likes of the International Monetary Fund and ratings agency Moodys which between them support the concept of prefunding, and say that prefunding is not necessarily bad for the economy.
It is also worth pointing out that other countries, including Ireland, are using or establishing similar prefunding arrangements for superannuation.
In the opposite corner are some local based economists and political parties that oppose the idea for reasons which are as much to do with politics as logic.
On balance it would appear there is no clear-cut evidence to say that prefunding is either right or wrong.
The important point is that the policy has been introduced, the fund is running and, assuming Labour retains power after next year's election, the fund will have grown to a substantial size.
That should mean that people get in behind the idea and make it work - even if they don't agree with the policy.
Maybe, as Cullen argues, consensus will follow the decision.
The whole debate around prefunding has also shown a side to Cullen that many people didn't believe existed.
He appears to be willing to listen to comment and make changes to the NZ Superannuation Fund, thus improving its chances of success.
(Although the policy is not up for change, the mechanics of it have been tweaked).
The two points which illustrate this observation are:
The Guardians who will look after the fund aren't going to be Labour Party toadies, nor is the board going to be used to repay political favours.
Earlier it was mooted that the Guardians should be a group of people who represent parts of society. That is it should be made up of people from the unions, Grey Power and other interest groups. That idea has quietly been shelved.
Now the criteria to get on the board is simple and the right one, investment expertise.
The second example comes down to how to invest the fund. Cullen has shown he won't be beholden to the Greens on ethical investment. While he has included a clause relating to socially responsible investing it is essentially meaningless and doesn't tie the board to a certain type of ethical investing.
This is sensible as ethical investing is a young and changing discipline. Also, the board's number one objective is to get the best possible returns.
Other positives this year include the Superannuation Symposium which was organised by the Office of the Retirement Commissioner in July.
This well-attended event provoked some useful discussion.
Cullen has signalled sorting out issues at the tier two level, that is workplace super, are high on his list.
The other major superannuation event during the year is that agreement has been reached on the level of entitlement for NZ Super. All political parties, with the exception of Act, now agree that the rate for NZ Super should be '65 at 65'.
That is each eligible married couple will be paid 65% of the annual average weekly wage as a pension from the age of 65.
This decision has been reached by politics, rather than any research into either the quantum or the eligibility age.
The electorate has told politicians this is the level the pension should be set at. If any party tries to lower the level, put some sort of means or asset testing on it, or push up the age of eligibility then they will suffer at the polls.
Clearly there have been some positive developments this year.
Two striking points on the negative side of the ledger are the politicians' lack of knowledge about investment issues and the Government's decision to slash its funding of the Office of the Retirement Commissioner (now called the Retirement Commission).
Comments that the he Government is borrowing money to gamble on international sharemarkets is nothing more than simplistic sound-bites designed for financially illiterate voters - hopefully there aren't too many of them.
It's time that some members of the house learnt Investment 101.
The second disappointment of the year was Steve Maharey's decision to slash funding for the Office of the Retirement Commissioner.
If the Government is serious about dealing with the savings issue then it should be prepared to put some money into the commission's coffers so it can educate people to make informed financial decisions. Maybe one of the commission's initial target markets should be the MPs.
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