Advisers give their views on unemployment insurance

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Financial advisers share their thoughts on government's proposed Income Insurance scheme.

Tuesday, April 19th 2022, 8:55AM 2 Comments

by Eric Frykberg

A significant number of advisers think more needs to be done for people who lose their jobs.

But many think the Government's proposed income insurance scheme is not necessarily the best solution.

The Government scheme would give workers 80% of their salary for up to seven months if they lose their job through illness, redundancy or many other causes.

It follows concern that newly jobless workers are sometimes forced to rely on welfare benefits which are insufficient to meet their needs.

An estimated 100,000 people lose their jobs each year and would benefit from the scheme if it is introduced. It would cost $3.54 billion per year.  This would be paid for by workers and employers each contributing 1.39 percent of wages and salaries.

Financial Advice New Zealand is concerned at what this will mean for its members and conducted a straw poll by webinar to better understand their views.

The information they got will be presented to the Government which has asked for submissions from the public.

Based on a quick survey, 23% of advisers supported the principle of the scheme. But 37% did not agree with the scheme, and 40% were unsure.

Answering another question, 41% of advisers agreed there was a problem to be fixed. But 22% felt the Government scheme was not the best way to put it right.

And 30% of brokers thought there might be a market solution to the problem of people losing their jobs, while 16% said no and 54% were unsure.

A total of 50% thought the private sector and the Government should work together on fixing this problem.

An overwhelming 70% of advisers wanted the scheme to be run on an opt-in basis, rather than being automatically universal.

The webinar produced a broad range of ideas from the adviser community about how to deal with the problem of workers losing their jobs.

One person thought a mid-level intermediary payment should be made to people after they lost their jobs but before they had to fall back on the low-level jobseeker benefit.

This would operate as a kind of stepping stone.

Others thought KiwiSaver funds should be made accessible to people who lose their jobs, as well as to the retired or to first-time home owners.

Some people felt the full length of the Government scheme should apply only to large companies and employees of SMEs should incur just three months.

And one person described the scheme as a sledgehammer to crack a nut. This comment came amid discussion of the current low unemployment rate.

But other people said unemployment might be very low now, but that fortunate condition might not last, and something should be done to provide for long term conditions.

Tags: insurance

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