ISI welcomes new workplace savings idea

The workplace savings group, headed by former Council of Trade Unions' economist Peter Harris, has reportedly recommended to Finance Minister Michael Cullen that all employers be required to offer access to superannuation as part of their remuneration. Employees would have to opt out of such schemes.

The money would be paid to the Inland Revenue, which would then forward it to an administrator that would then pay it into the superannuation scheme selected.

Employers would have to choose the superannuation provider.

The government is yet to formally consider the proposal.

Swanson says the workplace savings group report is the first part of two major steps to savings reform: the other being the work on the taxation of collective investments being carried out for the government by former BT chief executive Craig Stobo.

That group is to report by November.

“We would like to see those two streams of work come together through the government’s Budget process next year.”

New Zealand has had “20 years of mediocrity” in which the country had proved it cannot save in a totally hands off environment, Swanson says.

From a regulatory perspective, the whole savings issue can be viewed as a triangle, he says.

“The base is solid prudential regulation; at the next level is an intelligent taxation system which encourages savings; the next level is good regulation of advisers; and then the top level is solid consumer regulation. I’ve never heard any debate about that kind of structure in New Zealand and we need to have it.

“We have, for example, an antiquated Life Insurance Act form 1908; an unsatisfactory taxation regime which we hope will change with Craig Stobo’s work; and a financial adviser regime which is pretty deplorable, if you look at the recent IMF report.

“What we’ve got coming up though is a rare window of opportunity to change that, and the industry needs to take that opportunity.”

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

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