National promises $390 for retirement savings

By VERNON SMALL

National is promising a tax break worth up to $390 a year to encourage long-term retirement savings.

The cost of the rebate - 15c in the dollar on savings up to $2600 a year - is estimated at $120 million a year, says superannuation spokesman Gerry Brownlee.

"It is quite modest, but in the context of the overall spend available it is quite considerable."

National planned to offer an incentive of 20 per cent, costing $170 million a year, but pared that back because the money was not available.

"All you are saying is, 'Here is a small rebate. We hope it's enough to make you start thinking about shifting some savings from short-term to long-term'," said Mr Brownlee.

The rebate would be available on approved, locked-in savings schemes. National's next step, when fiscal conditions allowed, would be a "tax-deferred" element - possibly a lower tax rate on the earnings of superannuation schemes.

Contributions to pension funds are currently taxed, as are the earnings of the funds. But payouts are exempt from tax.

National would also reduce the disincentive for people on modest incomes to save. Earnings on pension savings schemes are taxed at 33 per cent even if a saver earns less than $38,000 and therefore has a lower marginal tax rate.

National leader Bill English yesterday confirmed his party was committed to current superannuation arrangements, which pay a married couple 65 per cent of the net average wage at age 65. But he again rejected the Government's pre-funding scheme.

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