Recommended.co.nz | Guide2.co.nz | Voxy.co.nz | Gimme.co.nz
Homepage | login or create an account

Now not the time for compulsory savings, says business lobby

Contributor:
Fuseworks Media
Fuseworks Media
Cameron Brewer
Cameron Brewer

Wellington, Aug 17 NZPA - The Council of Trade Unions (CTU) has big ideas of working towards a compulsory savings scheme where employers make the lion's share of contributions, but a business lobby says now is not the right time to increase the burden.

The Government has 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.

National scaled back the minimum contributions employers have to make to KiwiSaver members from 4 percent to 2 percent after coming into power.

CTU secretary Peter Conway said today the union was discussing a scheme which involved a "10 percent savings option".

That would involve compulsory employer contributions of 6 percent phased in over four years. Compulsory employee contributions would be 2 percent once employer contributions reached 6 percent and there would be a 2 percent government top-up.

Mr Conway said any inquiries needed to addresses equity issues, such as those resulting from lower pay rates and lifetime incomes of women, and also consider beneficiaries and non-working parents receiving a government contribution in lieu of the employer contribution.

"We need to investigate how to build on KiwiSaver to establish domestic savings vehicles such as KiwiBonds or other options."

The optional KiwiSaver scheme has been a winner for the public, with over 1.5 million people having joined it, but Newmarket Business Association chief executive Cameron Brewer said it was too early to ramp it up.

"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.

Mr Brewer said when the economy was bubbling along under Labour a few years ago the party should have taken the opportunity to make superannuation savings compulsory.

He said National would need to address the issue of boosting retirement savings when the economy picked up, as the proportion of the retirement-age population was rising fast.

Mr Key said New Zealand's net debt to the world -- government, households and businesses -- had jumped from about $100 billion in 2000 to almost $180b today and was forecast to reach about $250b in 2014.

He said he thought there had been a shift in opinion since 92 percent of voters rejected compulsory superannuation in the 1997 referendum.

"I think New Zealanders have come to realise they're going to live longer, so even with the retirement age at 65 they're going to be much more active in their retirement," he said.

"And relying solely on national super...puts them in a precarious position."

Featured Books on KiwiSaver & Saving

Credit Card Comparison TablesCompare Credit Cards - Independent interest rate and fees comparisons for New Zealand banks.

About guide2.co.nz : money

Find the latest money news and 'how to' guides on Guide2Money.

Ask our researchers your personal finance questions.

Your Questions. Independent Answers.