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UF backs tertiary savings scheme

Media statement

For immediate release

Tuesday, 29 March 2005

UF backs tertiary savings scheme

United Future leader Peter Dunne is urging the Government to press ahead with the hard work of designing a scheme that will enable families to save towards their children’s tertiary education.

“It’s unacceptable that we burden the nation’s graduates with high levels of debt just when they are beginning to contribute to the workforce, buy their first homes and start a family,” he said.

“United Future recently announced education policy that says:

- United Future will introduce a voluntary long-term savings programme that would allow parents to save for their children's future tertiary education from birth, drawing on contributions from relatives, the children themselves, charitable foundations, and appropriate incentives from the Government.

- The single most popular suggestion (59%) among submissions to the Government's discussion document Student Support in New Zealand was the establishment of a tertiary education pre-savings scheme. The establishment of a voluntary savings scheme is not intended to justify further increases to course fees.

- Tertiary education savings schemes have been established in Canada, Sweden and Britain. In Canada and Britain, the governments open the scheme with a lump sum that varies depending on parental income, but all children receive a minimum endowment. In the British case (the Child Trust Fund), this is in the form of a voucher parents can use to open an account with the provider of their choice.

- United Future would like to see parents given the option of automatically diverting part of their family assistance payments into such a savings scheme. Ideally, any government incentives should be spread over time to encourage regular saving, and like the initial endowment, would also be on a progressive basis depending on the family income at the time of each instalment.

- The fund will build up a stock of assets that the young person can re-invest or use when they reach 18. The British scheme allows savers to use the money for purposes other than tertiary education, if those purposes can be defined as improving life chances, such as starting a business, home ownership, or superannuation, since the main intent of this scheme is to encourage a savings culture.

United Future would envisage a similar style of scheme operating in New Zealand, given that subsidising asset creation changes behaviour in ways more beneficial to individuals than subsidising incomes.

Ends

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