ISI welcomes Labour's savings policy

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The Investment Saving and Insurance Association has welcomed Labour's savings policy, saying the current policy on retirement incomes is not sustainable and needs to change.

Sunday, October 30th 2011, 5:33PM 2 Comments

by Niko Kloeten

ISI CEO Peter Neilson said gradually increasing the age of eligibility to 67, enrolling all employees in a universal superannuation scheme, and moving superannuation contributions to levels similar to those in Australia were positive steps and good for New Zealand.

He called for cross-party discussions to address the long term issues New Zealand faces from an aging population, and to develop a scheme so that savings become the predominant source of income for retirement for the generation now entering the workforce. 

The best time for this would be just after the general election, he said.

"We need to create a sustainable scheme that provides employees and employers with greater certainty about the future, and removes the risk of successive Governments tinkering with it.

"We would certainly agree that, to provide greater security of future retirement income, there needs to be a much greater reliance on savings rather than taxation," says Mr Neilson. 

"Not only is our population aging with the baby boomers retiring, we are also living much longer.  It is these two factors that mean our current retirement income model, that is largely dependent on tax revenue, is going to be unable to meet future requirements."

Mr Neilson said that our increasing longevity after 65 means the age of entitlement for national superannuation would probably need to be increased beyond 67 over time.

"A 2009 article written for a UK medical publication, the Lancet, estimates that 50% of people born in highly developed countries after 2000 could live to be 100. 

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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