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Business sector warming to compulsory savings

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Aug 17 NZPA - The business sector appears to be gradually warming to the prospect of being involved in compulsory retirement savings schemes.

The Government has raised concerns about New Zealand's high level of debt and low level of savings and is getting a panel of experts to recommend ways to turn that around and induce more retirement savings.

Prime Minister John Key said the Government had made no decisions as to whether compulsory employer contributions or an increase in minimum employer contributions to KiwiSaver would be part of the picture, and that any decisions resulting from the expert group's recommendations may become part of next year's budget, or a campaign issue for the next election.

Phil Goff, whose Labour Party introduced the voluntary KiwiSaver scheme with a minimum 4 percent contribution from employers, said the move to address New Zealand's unenviable savings habits was belated considering it last year suspended contributions to the New Zealand Superannuation Fund and pared minimum KiwiSaver contributions from employers back to 2 percent.

He said if the Government was to change tack and introduce compulsory savings, it would have to be done over a period of time.

Concerns have been raised by some in the business sector about the prospect of compulsory retirement savings, but opposition to that has eased, according to the Employers and Manufacturers Association.

Chief executive Alasdair Thompson said most business people used to oppose compulsory savings, but support was slightly higher than opposition.

However, he said changes to savings schemes or super "must avoid loading more costs on business" and not be at the expense of national super entitlements.

Newmarket Business Association chief executive Cameron Brewer said National would have to address the issue of an ageing population and lack of retirement savings soon, but the business sector needed time to climb to out of the recession before getting too involved.

"Now is not the time to expect employers to make a bigger contribution to KiwiSaver. Nor is it the right time in the economic cycle to make Kiwisaver compulsory," he said.

Business New Zealand chief executive Phil O'Reilly said it was important for the expert panel to establish a solid framework of evidence based in a New Zealand context and taking into account the inter-relationship between the likes of national superannuation, tax policy and KiwiSaver.

"We need solutions that suit New Zealand circumstances and to understand at the outset that there will be no single solution to all of New Zealand's savings and investment problems."

Ron Mark, chief executive of the Federation of Maori Authorities, said compulsory retirement savings was a positive move for Maori.

Compulsory savings could be tied to tax cuts, the former New Zealand First MP said.

Finance Minister Bill English said there was widespread support for increasing national savings.

"Put simply, New Zealand has a history of spending more than it earns."

That could not continue, he said.

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