Super group to create generic savings product

The terms of reference for the working group says that the government is prepared to provide “funding to assist with the uptake of work-based savings products by removing some of the current tax disincentives…It may be that any such relief provided will only apply to a certain category of savings products.”

The brief for the group also says that “the issue of any tax incentive or subsidy for such a class of savings products will be considered separately by the Government as part of its consideration of the appropriate tax treatment of savings vehicles.”

The group, which is to report by August, is chaired by Finance Minister Michael Cullen’s former economic adviser, Peter Harris, and is also made up of Retirement Commissioner Diana Crossan, Chapman Tripp senior associate and chairman of the Association of Superannuation Funds of New Zealand Mike Woodbury, actuarial consultant Bernard Reid, AMP managing director Ross Kent, and Southland Credit Union general manager Andrew Leys.

The group’s overall task is to come up with a generic savings product which can be easily accessed by every employee.

“The government further considers that the broad adoption of generic work-based saving schemes of this sort is unlikely to develop without government action.”

Key features are to include access for all employees, with a deduction facility; automatic enrolment for employees unless the employee specifically opts out; “lock-in” until retirement or other methods of generating long term savings; and portability between approved products.

Other issues include compliance costs, limitations on the level of fees, investment profiles, and allowance for periods of non-contribution, and whether it should be mandatory for employers to offer such a product.

This approach is similar to that adopted in Ireland, where it was initially compulsory for all employers to offer a specific type of product to all employees.

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

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