New Zealand’s lacklustre superannuation industry has received a much needed shot in the arm from the Labour Government’s new tax regime.
New Zealand’s lacklustre superannuation industry has received a much needed shot in the arm from the Labour Government’s new tax regime.
The changes will see income tax on earnings above $60,000 increase from 33 cents in the dollar to 39 starting on April 1 this year.
However, the Treasurer, Michael Cullen, has indicated high income earners may be al-lowed to avoid the tax increase by bumping up contributions to employer based super schemes, which are taxed at 33 per cent.
“This is the first time since 1987 that employers have a better reason to keep or introduce a superannuation scheme,” says actuary Jonathan Eriksen.
He says while the effect on the overall savings patterns of New Zealanders may be negli-gible, with only about 5 per cent of the working population earning over $60,000 it is a “nudge in the right direction”.
Cullen says the Government will also act to stop people using eftpos super schemes, where super contributions can be quickly withdrawn, with the tax advantage only given to locked in retirement savings. A cap on superannuation contributions is also being con-sidered.
“The aim is that genuine superannuation savers, even if they are high income earners, will be taxed at 33 cents,” Cullen says.
“This incentive may persuade people to increase their superannuation savings, with some loss of potential tax revenue to the Government, but we are not averse to this.”
Financial planner, Kevin Seque, says advisers should wait for the final form of the tax changes before advising clients to contribute more their employer super plan.
“Planners always advise clients to invest in the most tax efficient manner but if every-thing is to avoid tax it won¹t help the client achieve their overall objective,” Seque says.
“Still, the Kiwi psyche is to want to pay as little tax as possible so there will be a shift of money to super plans.”
However, he says while some planners may lose business as people divert savings to their employer super schemes the changes will also create opportunities.
“Cullen’s ideas will determine the opportunities but there are plenty of good employers out there who want to help their employees with a super plan,” Seque says.
He says there is a great potential for planners to market their services to employers to create individualised employee benefit plans but most planners don’t know how to sell to corporates.
“For example the Life Brokers Association (LBA) is involved in licensing planners to sell a Cafeteria Plan to employers,” Seque says.
The Cafeteria Plan is in effect a wrap account that offers employers the ability to offer their employees a tailor-made financial services package with only one pay packet de-duction to perform.
The LBA has currently licensed over 30 experienced planners and brokers to sell the Cafeteria Plan.
Discount retailing chain, The Warehouse, has again rescheduled the launch of its line of banking products with an announcement now expected some time in next three months.
The Warehouse originally intended to launch the new products at the end of January this year but the deal with its prospective banking partner has suffered delays.
The banking partner, initially reported to be WestpacTrust, is now being touted as ANZ.
Chief operating officer at The Warehouse, Greg Muir, says the hold-ups are not signifi-cant.
“It takes time to put these things together and you must do it right,” he says.
Muir says the launch of a banking service in February by retail rivals, Farmers, is not a cause of concern.
Farmers announced a deal with AMP Banking, National Bank, WestpacTrust and Sover-eign to offer banking, mortgage and other financial services through its nationwide chain of retail stores.
