27 October 2011

Workers not helped by superannuation proposal

Labour’s superannuation policy would backfire on workers, says BusinessNZ.

Chief Executive Phil O’Reilly says the plan for compulsory employer contributions equivalent to 7 percent of employees’ wages would impose grim costs on businesses, to the detriment of business and economic growth.

“But this would also mean lower wages as employers take the contributions into account when setting wages.

“It could also potentially lead to some job loss at the margins.”

Mr O’Reilly said many employees would be worse off with the abolition of the opt-out provision.

“Compulsion does not suit everyone’s needs. Compulsory saving even at 2 percent of wages will cause real hardship to some, making it harder to care for a family, save for a home or provide for children’s education.”

Mr O’Reilly said it was questionable whether there was a need for further compulsion given KiwiSaver’s enrolment success as a voluntary scheme.

“In setting this policy the Labour Party refers to Australia’s Age Pension scheme – but Australia’s compulsory scheme has significant differences from Labour’s proposal, including income and asset testing.

“It is not a valid comparison to imply that the scheme proposed by Labour would achieve the same savings levels as Australia’s.

“There is no strong evidence that KiwiSaver in its current form has increased net savings, nor any evidence that Labour’s proposal would do any better.

“However one area of Labour’s policy that employers will agree with is the lifting of the entitlement age. This element of Labour’s policy is realistic and positive.”

ENDS

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