Monday 30 April, 2001
Support High For Compulsory Retirement Savings
Statement made by Roger Perry, Chief Manager Investment Services,
ASB Bank Limited
The New Zealand public is rapidly warming to the idea of compulsory retirement savings.
In its latest nationwide Investor Confidence Survey, ASB BANK found that nearly three people out of four said “yes” when asked if they supported compulsion.
This in an increase of 11 percentage points (up from 61% to 72%) on the public’s position on the issue two years ago*.
ASB BANK Chief Manager Investment Services, Roger Perry, says it represents a significant shift in public opinion.
“The danger is that the public perceives that the “Cullen Scheme” to pre-fund New Zealand superannuation solves the Superannuation issue. In fact, it does no such thing. It merely helps provide a degree of certainty about the current level of entitlements, which for many people will not be sufficient to provide a sustainable retirement income.”
The current level of payment is $14,117 a year for someone living alone and $21,380 for couples over 65 years of age.
“The message we are giving to our customers is that while this level of payment is a sound base, they would be wise to supplement it with funds put aside in their own, private retirement scheme.
“It would be a tragedy if the current debate in relation to the New Zealand Superannuation Bill, currently going before a Select Committee, gave people a false sense of security and in fact became a disincentive to save personally for retirement.
“An encouraging recent development is the re-emergence of workplace super schemes.
Three of the main factors contributing to this are the:
- Government has agreed to tax payers who are taxed at 39 cents to be able to sacrifice their salary, in favour of contributing to a superannuation scheme, on which tax is only charged at 33 cents in the dollar.
- increasing number of Australian companies operating in New Zealand, which have a culture that supports and encourages staff superannuation schemes
- flexibility and portability of modern superannuation schemes.
“New Zealand's adequate provision for the superannuation of the baby boomer generation is not solved by the Cullen Scheme, it is only a first step and a small one at that,” says Mr Perry.
ASB BANK took their nationwide Investor Confidence Survey one step further for the first quarter 2001 by asking respondents an ad-hoc question about their views on retirement savings.
The Investor Confidence survey showed a sharp overall rise in investor confidence for the first quarter 2001.
*Results from the SaverPulse survey with the same question for the March 1999 quarter.