Think tank's further thoughts on super
The New Zealand Institute recently launched its first project, Creating an Ownership Society. In this article institute boss, David Skilling, expands on the topic.
Wednesday, September 8th 2004, 8:59AM
Chief executive David Skilling says there is a lot of “angst” in middle New Zealand about the issue and it could easily come to the surface during the campaign.
He feels that it is a subject where there will be clear differences between the political parties.
The institute, which was launched a couple of months ago, is committed to generating debates, ideas and solutions to make New Zealand a more prosperous nation. It sees itself as playing an important role in discussing issues as it is outside the political arena.
It’s first project is what it calls Creating an Ownership Society. It’s all about how to get New Zealander’s to own assets and increase their individual wealth.
A report done by the institute paints a grim picture of New Zealanders as being not particularly well-off financially compared to other Anglo nations.
Skilling says it is important to change this picture as wealth leads to security and opportunity, participation in society.
While the paper scopes out the issues and sets a framework for discussion it doesn’t offer solutions.
However, Skilling gave an outline of some of his possible solutions at a presentation in Auckland earlier this week.
He likes the idea that people save into individual accounts as outright compulsion is exerting too much control over people.
Skilling appears to be supportive of the idea being floated at the moment whereby employers offer superannuation schemes to their members on an opt-out basis. That is you’re in unless you opt-out.
He says the evidence is that workplaces are a good place to capture savings, and that opt-out schemes have far greater take up rates than opt-in ones.
Opt-out schemes end up with enrolment rates of 80-90%, while opt-in ones (like the Teachers and the State Sector schemes) achieve rates of around 40%.
The concept of opt-out being promoted is almost compulsion without being outright mandatory.
On compulsion Skilling says he would probably support it if it was “saleable” to the public, but he doesn’t believe it could be sold to the electorate.
In fact he says; “Compulsion buys trouble.”
When asked about the multi-billion New Zealand Superannuation Fund and whether it was a good idea, he was supportive.
He described it as being a “prudent” thing for the government to do.
His argument is that the fund, which is designed to pay some of the future costs of the state pension, was filling what he called a “fiscal hole”.
That is the government has future liabilities and it needs to get the money from somewhere.
“In terms of dismantling the fund I’m pretty nervous about that.”
Likewise he was not supportive of the idea of putting it into individual accounts as suggested by New Zealand First.
While the institute is supportive of the concept of people having their own accounts and therefore their own assets and wealth, putting the tier one super into individual accounts wasn’t a good idea as it doesn’t solve the equation about how to fund state pensions.
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