Action Needed From Govt To Jumpstart Savings

Strong Action Required From Government To Jumpstart Retirement Savings

Workplace Superannuation Group proposal does not go far enough to ensure New Zealanders start adequately saving for retirement

Statement made by Simon Swanson, Managing Director Sovereign

“The proposed superannuation scheme designed by the Workplace Superannuation Group is likely to have little impact on New Zealanders’ retirement saving habits if it goes ahead in its current format.

The proposed scheme presented this week to Finance Minister, Michael Cullen, simply does not provide enough incentive for both employers and employees to participate. The success of the State Sector Retirement Superannuation Scheme, which has already achieved a 44% uptake, is an excellent example of how a scheme can work. But it begs the question – how much of the success is a result of the employer contribution?

Associate Finance Minister, David Cunliffe, highlighted the importance of workplace-based super schemes at the recent Association of Superannuation Funds of NZ conference. What we fear is the report presented to Government by the Group will not drive people to save for their retirement.

Sovereign made a submission to the ISI regarding the proposed scheme. We stressed the need for tax concessions or a direct subsidy from employers. Leveling the playing field (between direct and managed investments) is not enough – investors need a trade-off for locking their money into a scheme.

We believe the ‘sweeteners’ examined by the Group will have negligible impact on uptake for the scheme. Retirement saving has had 20 years of neglect in New Zealand and a significant undertaking from Government is required to correct this.
There’s a limited culture of saving for retirement in New Zealand, and without a change in attitude by the public, generated by strong Government action, any attempt to introduce a new scheme appears likely to provide nothing but a false dawn.”

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