Big hurdles for compulsory superannuation

Major hurdles have to be overcome before compulsory superannuation is realistic, says National Party Finance spokesman Bill English.

“Much of the commentary I hear is reaction to understandable concerns, but it is the result of short-term frustration with Michael Cullen’s refusal to proceed with tax cuts and Australian private equity buying New Zealand companies,” English told the Institute of Chartered Accountants today.

“Any move to compulsory super needs much stronger foundations than just arguments about tax cuts and private equity.

“Some commentators have proposed that the untested Kiwisaver scheme be turned into a compulsory scheme. But Kiwisaver hasn’t even started yet. It’s a complex system with high costs and is nowhere near well enough understood or robust enough to become a compulsory scheme.

“More importantly, there is a fundamental misunderstanding of the Australia compulsory savings scheme. The Australian scheme is designed to replace publicly-funded retirement income. It sits alongside a low level pension, which is strictly income and asset tested.

“After 30 years of debate, New Zealand has just reached a consensus to go in the opposite direction with universal superannuation, no income and asset testing and pre-funding to help sustain the scheme for at least the next 50 years.

“For many Kiwis who struggle to save over and above their mortgage, national superannuation offers a guaranteed inflation-proofed, growth-proofed, risk-free retirement income. It’s one reason New Zealanders invest so much in housing, rather than other forms of investments or savings.

“There is no evidence that moderate income earners are willing to forgo wage increases, or allow the Government to take money off them that they can’t afford.

“There are no simple means of increasing savings. I believe the country needs a more balanced strategy, including investment opportunities and growth, not just more savings.”

This is a press release from Bill English