All-parties super hope dealt blow by National

By VERNON SMALL deputy political editor

Hopes for an all-party pension policy have taken another blow, with a National Party task force rejecting a Government plan to partially pre-fund the cost of baby-boomers' superannuation.

The task force's report will form the basis for debate within the party before a final position is announced this year.

In his report, task force chairman Sir George Chapman said it was difficult not to conclude that Finance Minister Michael Cullen's scheme was "a confidence trick on voters by proposing a flawed long-term scheme for short-term political purposes."

The report said the Government's scheme would provide only 14 per cent of the cost of superannuation in 2040. Yet it would need surpluses of $2 billion a year, which this Government had not been able to achieve.

Instead, the task force recommended using surpluses to cut government debt before baby-boomers started retiring.

With the current level of superannuation sustainable for the next 10 years, slashing government debt to zero by 2015 should be a key National policy.

A survey of party members backed the current level of superannuation and rejected income or asset testing. Compulsory pension savings were given the thumbs down, but members were nearly unanimous in backing tax relief for private savings.

The report said employers should urge employees to invest in managed funds through voluntary deductions, and that all taxpayers be encouraged to save through a tax incentive for long-term contractual savings.

It favoured a move away from the current "TTE" tax system, where savings come from tax-paid earnings, fund earnings are taxed, and payments from a fund are exempt.

In its place it backed a scheme exempting pension savings from tax, taxing earnings in pension schemes, and exempting payments from invested funds - an "ETE" scheme.

Finance Minister Michael Cullen has floated a "TEt" option, where the earnings in a fund are exempt from tax, but tax is paid on the earnings portion of any payout - hence the small final "t."

In other recommendations, National's task force wants those who reach 65 to have the option of delaying pension payments in return for a higher payment later.

A "seniors' card," which would attract private sector discounts, could be included in party policy for the 2002 election, although more work was needed.

The report said senior citizens should be encouraged and assisted to stay in their own homes during retirement.

"A mortgage-free home ... should be the objective of every person reaching retirement age, as the payment of a mortgage or rental imposes a serious burden on retirement income."

The report urged consideration of protection for those buying into retirement villages, and recommended increasing the asset limits for the residential care subsidy.

On health policy, it said National should advocate a tax deduction for private health insurance for retired people.