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Compulsory retirement savings to be considered

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Aug 15 NZPA - Compulsory retirement savings are reported to be on the table as part of a wider review of superannuation.

A spokesman for Finance Minister Bill English declined to comment to NZPA on the report in today's Sunday Star-Times that a working group, based on last year's Tax Working Group, was being set up.

The group would look at compulsory savings as part of an overall review of retirement savings and New Zealand's overseas borrowing. It would look at the Cullen superannuation fund, KiwiSaver and tax breaks for savings - which could halve the tax paid on some bank deposits and other investments.

Just last Wednesday Mr English bemoaned New Zealand's debt problem, saying that in 2000 the country's debt to the rest of the world was about $100 billion but now it was close to $180b, and forecast to hit $250b by 2014.

"So we have a big task to turn this economy around and rebalance it towards savings and growth," he said then.

The Sunday Star-Times said PricewaterhouseCoopers tax expert John Shewan would be in the group and may chair it.

Mr Shewan would not say if he had been asked to participate but said the issue of whether KiwiSaver should be compulsory would be considered. Nearly half the working age population had already signed up to the scheme.

A 1997 referendum rejected a compulsory savings scheme proposed by New Zealand First leader Winston Peters but the newspaper said the idea was now being raised more and more.

Other areas for study would include incentives to boost savings, such as tax deductions for contributions, a lower tax rate, or taking inflation into account.

"The argument is if you are earning 6 percent interest and inflation is running at 2 percent then you should only be taxed on 4 percent. That's the argument and it has been around since Adam was a schoolboy," Mr Shewan said.

Labour Finance spokesperson David Cunliffe said he did not have a problem with the Government seeking advice from outside experts but found it surprising that National did not already have a plan for retirement savings.

"Outsourcing the problem to a savings working group is tantamount to an admission that any effects from tax changes have been minimal, and National has nowhere else to go," he said.

Speaking on TV3 political show the nation this morning, Labour leader Phil Goff indicated his party was working on a policy for super savings and did not rule out a compulsory model.

"We absolutely have to increase our savings as a country," he said.

"If we want to own our own future we've got to have the money to invest. We're looking to have a universal KiwiSaver programme. Now how we do that, the details of how we do that, we're still working through."

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