Research body calls for compulsory super scheme

A leading economic research body, the New Zealand Institute of Economic Research (NZIER), has expressed support for a compulsory retirement savings system.

Director of the NZIER, Alex Sundakov, says the combination of New Zealand's worsening current account deficit and the aging population is creating a dangerous situation for future generations.

"The current account deficit problem and the ageing population will lead to high taxes on the young in the future," Sundakov says.

He says higher taxes will cause young people to leave the country and further decimate the tax base.

Economic data produced by the NZIER indicating a fall in New Zealanders' savings levels and net worth has led the Institute to revisit the concept of a compulsory system.

"In the past we decided a compulsory savings system wouldn't change household savings behaviour. We've thought more about it and increasingly have come to the position that something must be done to help New Zealanders save more aggressively," Sundakov says.

New Zealanders soundly rejected a compulsory superannuation system in a 1997 referendum put forward by the then Treasurer, and head of New Zealand First party, Winston Peters.

However, Sundakov says in hindsight the Peters' scheme should probably have been adopted.

"Something like the Peters' scheme could work, with compulsory savings going to private accounts," Sundakov says.