Savings report scepticism
Tower New Zealand managing director Paul Bevin has sounded a strong note of scepticism about the government’s workplace savings group recommendations.
Thursday, September 23rd 2004, 12:42PM
“I think they came up with a proposal which was more or less inevitable given terms of reference,” Bevin says.
“I don’t accept that a case has been made that New Zealanders are in fact poor savers-and that, if they are, workplace savings should be preferred over other forms of saving.”
Instead of rushing into a prescriptive solution pushing New Zealanders into workplace savings schemes Bevin says the government should wait for the outcome of the report on taxation of investments, led by former BT head Craig Stobo.
That report is due at the end of October.
“The first priority should be removing some of the broader disincentives to save, and distortions in the tax treatment of savings. If those handicaps, such as high rates of tax on superannuation funds, are dealt with then there might well be more incentives to use managed funds.”
The Workplace Savings Group suggested making all employers of more than five employees offer access to superannuation schemes. Although the group was specifically barred form considering tax incentives, it suggested a number of non-tax “sweeteners.”
Bevin says such schemes will have an advantage over non-approved managed funds, because they will be able to offer bulk discounts.
“What is often not recognised is that people in those employer-based schemes get a better deal anyway, because they pay wholesale rates rather than retail rates. Also there is no adviser fee, because effectively the employer performs that service.”
And if –as the Peter Harris group proposes – the tax system is used to collect workplace-based savings, there is a further hidden subsidy, Bevin says.
“That takes care of the administration costs. And if only approved schemes are able to take part in this, then other managed funds will be at a competitive disadvantage.”
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