The New Zealand Government’s proposed pre-funded superannuation scheme could be in
place by July next year, according to Peter Harris, economic adviser to Finance Minister Michael Cullen.
The New Zealand Government’s proposed pre-funded superannuation scheme could be in
place by July next year, according to Peter Harris, economic adviser to Finance Minister Michael Cullen.
Harris says talks are currently underway with the Labour Party’s coalition partner, the Alliance, in order to prepare a scheme acceptable to both parties.
“The intention is to put forward a detailed design that would then go through the Cabinet process,” Harris says.
“Potentially the concept could be on the Cabinet table by July, and following discussion with other parties, the legislation putting the scheme in place may take effect from July 1 next year.”
The establishment of a government fund to pay for future pension liabilities was one of the key promises of the Labour Party before last year’s election.
However, the implementation of the scheme – promoted chiefly by Cullen – has been stalled by a lack of support from the Government’s parliamentary allies, the Greens and the Alliance.
Cullen has changed tack a little by suggesting the superannuation scheme could now be funded out of general revenue instead of the original plan to set aside eight per cent of income tax.
This idea was sketched out in the Budget delivered by Cullen last month but no firm commitment was given to its implementation.
Cullen says some facility setting out the fund requirements is needed but there should be an “escape valve” if it is judged the Government needs to contribute more or less each year.
“It will not be a discretionary fund and any deviations from the set contribution level will need to be explained in Parliament,” Harris says.
He says this may involve obtaining Parliamentary approval through a vote.
While there are many details of the plan still to be worked through, Harris says the Gov-ernment is “hopeful and relaxed” about the issue. However, superannuation specialist Jonathan Eriksen says Cullen’s scheme is unlikely to pass through New Zealand’s current complicated political process.
“Politically this Government is losing it. I doubt whether the Alliance or the Greens will support Labour’s super fund idea,” Eriksen says.
Harris says the support of the Greens and the Alliance may not even be necessary as the possibility of wider parliamentary approval exists.
“New Zealand First have an obvious interest in a super fund and even the National Party may support the idea,” Harris says.
“There’s been a couple of indirect indications from National that it is looking at its super-annuation policy. For example, a fairly senior National delegate recently said at a confer-ence that the party should ‘review its position’.”
Opponents of the Labour scheme have claimed it will delay government debt repayment and reduce the incentive for private savings.
Harris argues that even if all government debt was repaid sooner there would still not be enough set aside to met future pension payments.
“Sooner or later the government will have to accumulate financial assets,” he says.
“I also think that the incentives to private savings work the other way. If people are un-certain about their pension arrangements private savings will never increase but if they’re confident about it they will make sensible financial planning arrangements of their own.”
Tower has linked up with one of New Zealand’s most popular retail outlets to sell a range of managed funds.
New Zealand Post, which has an estimated 800,000 people through its doors each week over a nationwide chain of Post Shops, will begin selling a number of Tower managed funds at selected stores later this year.
Richard Baker, general manager investment products at Tower, says if the concept takes off there is a “huge growth potential” leveraging off the distribution New Zealand Post offers.
“Distribution is the name of the game. In this case it’s a two plus two equals five situa-tion,” Baker says.
He says a trial, beginning in September at the earliest, at a selection of Post Shops has been scheduled to sort out technical issues.
“The trial will enable us to fine tune all the systems and processes before we start the full roll out next year,” Baker says.
While many details, including the branding, are yet to be finalised Baker says a range of managed funds and possibly a master trust product, aimed primarily at the ‘mums and dads’ market will be on sale at the Post Shops.
“The products will be very competitively and transparently priced,” Baker says.
He says while New Zealand Post staff will receive training from Tower they will not be offering financial advice with the products.
“Anybody wanting further advice will be referred to the Tower internet site or freecall phone number.”
This year’s Financial Planners and Insurance Advisers Association (FPIA) conference kicks off next week in Wellington.
The FPIA 2000 Conference will be held over July 13-15 at the Wellington Festival and Convention Centre.
Event organiser, The Conference Team, say over 400 registrations have already been re-ceived but expect more registrations to be received up to and including the first day of the conference.
