Employers like savings scheme but not choosing a fund

By BRIAN FALLOW

A survey of employers has found broad but qualified support for a proposed workplace superannuation regime.

More than 80 per cent rejected a key plank of the plan that employers should choose a savings product on behalf of their employees, Employers and Manufacturers Association chief executive Alasdair Thompson said.

Some 262 EMA members responded to the survey, a response rate of 11 per cent. Under the proposals, issued by a Government working group headed by economist Peter Harris, a new employee is automatically enrolled in a workplace savings plan, unless he or she opts out. Employers choose a fund manager from an approved list, although employees would have the right to pick another one instead.

Thompson said putting the onus on the employer to choose a savings scheme had received an overwhelming thumbs-down.

Just as the employer puts a salary into the employee's chosen bank account, employees should choose where their retirement savings went.

"Other than that, there seems to be a solid measure of acceptance by employers for the principles of the group's proposals."

Employers would deduct employees' savings using a special tax code, in the same way that tax and ACC payments are deducted now. The savings would be forwarded to Inland Revenue, which would send them, through a central administrator, to the chosen fund.

Most firms considered the compliance costs involved acceptable, apart from those with five or fewer employees, which would be exempt from the scheme anyway. "Even a third of the smaller firms don't want the exemption to apply, which comes as a surprise," Thompson said.

Most supported employees being able to opt out. Nearly as many would prefer savings to be locked in for the longer terms as would prefer them to be accessible after a qualifying period.

Two-thirds of the respondent firms wanted a broader range of savings products to qualify than just registered superannuation funds.