Savings: A good start, but ...

By PAUL PANCKHURST

The Budget tackles some of the causes of New Zealand's "low savings culture" but does not go far enough, says Vance Arkinstall, chief executive of the Investment Savings and Insurance Association.

The most significant move, from a savings point of view, was cutting tax on employer contributions to the superannuation funds of employees earning less than $38,000 a year.

From April next year, employers will be allowed to tax such contributions at 21 per cent rather than 33 per cent.

Arkinstall's organisation welcomed the move, but queried the logic of leaving what was effectively a tax break at the other end of the scale, for those earning more than $60,000.

"Surely low and middle income earners are the ones who need the assistance," he said.

Arkinstall and the association approved the Budget's backing of the World Bank "three tier" approach to providing adequate income in retirement.

That approach is based on public provision, employment-related provision and private provision.

Another tick went to the statement that the Government would work on removing the disincentives for employers to offer superannuation schemes "and the inequity of the current tax law in overtaxing a fund's earnings in relation to low-income savers".

Arkinstall described the overall thrust as "the right direction" - "but these moves by themselves are not going to result in any major change in the low savings culture that currently exists".

Stronger signals were needed, to reinvigorate employer superannuation and savings.

Another aspect of the Budget's treatment of savings issues was a lifting of the allocation to the New Zealand Super Fund from $1.8 billion to $1.879 billion.

Arkinstall pointed out that this was not "extra" money for the area, but "bringing forward the funding of an existing obligation".