Opposition to workplace savings scheme mounts

Two unlikely allies have launched separate attacks on the workplace savings proposals announced by the government last month.

Tuesday, November 16th 2004, 3:54AM

by Rob Hosking

The Consumers Institute and the Association of Superannuation Funds (ASFONZ) have weighed in against the proposals to increase participation on workplace savings schemes.

The institute- which has become a stridently vocal critic of the entire financial services industry this year – says that after 10 years saving in “a typical savings fund” the wage and salary earners putting aside $20 a fortnight “could be $1800 worse off than others who used the money to reduce their mortgage.

It says people who are saving for a deposit for a house would be worse off if they enter such a scheme, and so would those who have a mortgage or who have large credit card debt.

It also takes yet another swipe at the entire financial services industry.

The working group’s proposals are “like a Santa wish-list from the investment companies," says senior research writer David Hindley.

“They'll get new money in and collect fees for managing it regardless of how well or how poorly they perform."

The institute also criticised the proposal that wage and salary earners are automatically enrolled in workplace schemes, and have to opt out of them.

The institute also queried whether New Zealand really has a savings problem. That last point finds it on common ground with ASFONZ.

“We are concerned that the recommendations presume New Zealand has a retirement problem when the best evidence available indicates that New Zealanders are behaving rationally,” says ASFONZ executive director Bruce Kerr.

ASFONZ says it is also concerned that making workplace savings mandatory – as proposed by the working group – will have a negative effect on employers’ attitudes to workplace superannuation.

While the association endorses the working group’s notion of a “pathway” with a new generic scheme building up slowly, it is concerned that eventually this would lead to the closure of existing schemes.