Workplace Savings –Hitting the headlines and hidden in the detail

At a time when many employers are now developing initiatives for their own arrangements, led by the Government’s own new State sector arrangements, it would be a perverse outcome if these employers were now put off by the Group’s report.

The Terms of Reference for the Group were such that they were required to provide advice on the design and implementation issues to be resolved in delivering a widely adopted generic work-based savings product. In effect, the terms were based on the premise that increasing the level of savings via work-based arrangements was a desirable outcome. The Group has, of course, complied with its terms and has produced a design that aims to achieve the objectives they were set.

Whilst the design of the generic product has attracted all the attention, the Group did not take a view on whether or not it should be implemented – that is a decision to be made by politicians.

In its report the Group introduces the concept of a “pathway”. This pathway introduces levels of intervention that are available to the Government to pursue its objective of increasing savings through work-based arrangements. The pathway begins with a light-handed approach of support via education and information programmes. The pathway leads on to more interventionist proposals and culminates with a generic scheme, with or without taxpayer-funded “sweeteners”. The authors of the report state “we….do not presume to make the policy decision about how far along the pathway the government wishes to progress”.

From the perspective of ASFONZ members and their employees/beneficiaries, it is a relief to see that the Group is cognisant of the need to align any new arrangements with existing schemes. In chapter 2 of the report we read “Any new generic scheme would build contribution numbers and member balances slowly, and those gains would be rapidly and materially counteracted if the design features gave either incentive or excuse to close existing schemes and distribute fund balances. Our first building block in any solution is therefore to protect the base of the pathway”. If the suggestion of streamlining the existing regulatory regime is taken up this would be a bonus for existing schemes.

If the Group’s proposals are implemented it is most likely employers who have already established workplace super schemes will not need to change these and may in fact find requirements for their operation are simplified.

New Zealanders do have a chance to have their say on the matters addressed in the report through a consultation process that extends to 31 October 2004. ASFONZ will take an active part in that consultation.

The consultation process, reflecting the Group’s limited terms of reference, does not extend to discussion on whether or not increasing savings via work-based schemes is a desirable objective. That is a whole debate of itself-one that deserves to be had.

Disclosure: Mike Woodbury, the current Chairman of ASFONZ, was a member of the Savings Product Working Group. In view of this role, this press release was prepared by Jill Spooner on behalf of the ASFONZ Council.

A press release from the Association of Superannuation Funds of New Zealand

Commenting is closed