More work-based retirement saving schemes needed, says taskforce

By PAULA OLIVER


Employers need more encouragement to take part in work-based retirement savings schemes, the Government has been told.

A special advisory group to promote participation is one of many recommendations made by this year's Periodic Report Group, established as part of the Todd Taskforce's look at retirement savings in the early 1990s.

The group convenes every six years to analyse aspects of the country's superannuation and retirement savings policy and present a report to Government.

Anyone expecting this year's report to advocate major changes will be disappointed.

But its chairman, Vance Arkinstall of the Investment Savings and Insurance Association, said the group had purposefully taken a more practical approach because past reports had had only minimal effect.

"If you look at past PRG reports they've actually gone nowhere. We've put in a series of quite specific recommendations.

"Not all of them will make the final cut, but those that do could well form a positive work programme for Government to put into place over the next two or three years."

The group finds that New Zealand has a small window of opportunity to do something about private retirement savings before the baby boomer generation starts collecting superannuation.

It recommends that work-based savings schemes be promoted, that education programmes be bolstered and targeted at women, Maori and Pacific Islanders, and that tax incentives be avoided.

Less than 15 per cent of the labour force belong to registered work-based schemes. To raise that figure, the report suggests that a special advisory group be set up to agree on an approach to reduce the barriers to participation for employers and employees.

Arkinstall said the group could be constructed out of one that already meets, which includes the Council of Trade Unions, ISI, Business New Zealand, the Retirement Commissioner and the Association of Superannuation Funds of New Zealand.

That group had already done a lot of work but it had no mandate or recognition from Government.

Work-based saving need to move away from traditional employer-sponsored schemes towards more portable, individual plans, the report says.

It suggests that the new advisory group could present a report to the Government by the end of next year.

The group does not recommend tax incentives, but says that if the Government wants to go down that road then the changes should favour low and middle-income earners.

It also recommends that the Government progress towards a strengthened self-regulatory model for financial advisers.

They are currently largely unregulated.

Retirement Commissioner Diana Crossan yesterday welcomed the idea of financial advisers coming up with an approach to regulation and passing it to the Government by the end of next year.

"It is high time that the industry takes this recommendation to heart," she said.

"The need for some action in this area has been talked about for 20 years, and it's now time to do something about it.

"It is essential that New Zealanders have access to high-quality financial advice and that they can trust the advisers they consult."

The Financial Planners and Insurance Advisers Association said it agreed with the group's comments.

"The challenge will be to get all the advisers in New Zealand to sit down and come up with an agreed self-regulation plan to present to the Government by the end of next year," FPIA chief executive Phillip Matthews said.

Business NZ chief executive Simon Carlaw said the report was correct to focus on educating people about saving and removing disincentives.

"We also agree that there is potential for more opportunities for people to save for retirement through deductions from wages at source, into flexible, portable superannuation schemes."

But he was disappointed at the report's failure to tackle the effect of the NZ Superannuation Fund in making people think there was no need to save for retirement.

"The existence of that scheme, that can never fund more than a fraction of the future costs, is making people too complacent."

Ultimately, Carlaw said, the best way to boost saving was to boost economic growth.