National pledges tax rebate for savers

By VERNON SMALL

National is promising tax breaks worth $500 a year for retirement savers as the party tries to reverse its declining poll ratings.

Leader Bill English announced the rebate plan yesterday during a three-day caucus retreat as the party reeled from the latest opinion poll, showing National trailing Labour by almost 20 percentage points.

Mr English said the tax incentive, which is yet to be finalised or fully costed, might be applied to a capped level of savings of $2500 or more a year.

It would encourage saving, especially by the young.

They would be offered a rebate of 10 to 20c in the dollar on locked-in savings schemes.

A saver putting $50 a week aside would qualify for a tax rebate of up to $10 a week.

Mr English said details such as whether the rebate would apply only to new schemes would be discussed with the industry.

Ideally, savings would be locked in until retirement to qualify for the rebate, but National would discuss with the industry schemes it could offer.

Finance Minister Michael Cullen said National's policy was fine for big earners who could save enough for a secure retirement.

Treasury data showed that only the top 10 per cent of households saved more than $2000 a year.

Superannuation analyst Michael Littlewood, who has also attacked the Government's scheme, said National's plan was a retrograde step.

"The international evidence is that tax incentives don't work, are expensive to introduce and administer, favour the rich at the expense of the poor and don't improve saving levels," he said.

"Bribing taxpayers with their own money has worked in the past, and National is hoping to repeat the medicine."

But AMP managing director Ross Kent welcomed the plan.

"Nine out of 10 people have got the message they ought to be saving, but less than half are doing anything about it."