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Govt tells employers to offer super schemes to workers

Compulsory access to workplace superannuation, linked in to the tax system, is about to be put to ministers by the government’s superannuation working group.

Thursday, August 12th 2004, 12:01AM

by Rob Hosking

The group, headed by economist Peter Harris, will report to Finance Minister Michael Cullen over the coming week.

The group is understood to be recommending that all employers, except very small ones, be required to offer access to superannuation as part of every employee’s pay package.

Employees will be able to opt out of the scheme. The employer will have to choose a provider and will pay the money to the Inland Revenue Department, which will then forward it to the provider.

This will allow ease of portability between workplaces. Cullen has spoken enthusiastically about workplace savings schemes, as has Harris – a former adviser to Cullen and, before that, a Council of Trade Unions economist.

The numbers of employees in workplace savings schemes has declined from 30% of the workforce to 14% since 1990, and only about 4% of employers – mostly large firms – still offer superannuation as part of remuneration.

Employers are likely to baulk at the compulsion aspect, and also the compliance costs involved, although the government has already dealt with the two biggest bugbears – the requirement to issue a prospectus and also the clumsily applied 33% withholding tax.

The group – and ministers - can point to recent Treasury research which appears to show that people with access to workplace savings schemes have a better savings record than those who do not.

Proponents of workplace savings are also likely to be pleased by the requirement for employees to opt out of such schemes, rather than opt in. Other research shows the uptake of workplace savings packages is much higher when the onus is on employees to opt out.

The government will also be hoping that the uptake of workplace superannuation in the private sector is as healthy as the approximately 40% of the state sector workforce which has been entitled to join the state sector retirement savings scheme.

That scheme has an “opt in” rather than an “opt out” approach – but it does have a generous employer subsidy, which may make up for the absence of the “opt out” approach.

For all the latest superannuation news visit www.supertalk.co.nz At SuperTalk you can sign up for your own superannuation newsletter

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

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