AMP On Super: New Zealand Can Learn From Australia
An Australian superannuation specialist says that New Zealand should at least look at the Australian experience when developing a national superannuation framework for the future. Both countries face common issues, and there have been key successes in Australia which New Zealand should draw on, as well as some pitfalls to avoid.
Kevin Casey, Manager Superannuation Strategy for AMP Australia, was in Wellington last week to speak to Government officials, MPs, key policy people and media about the how Australia is preparing to look after its ageing population. He says that although there are areas to be ironed out, the country has adopted a three-tier system, which on the whole has been highly successful.
"The key is in shared responsibility," he says. "In Australia, responsibility for an individual's retirement income is shared by employers and individuals, as well as the Government. The system is geared to encourage people to supplement the assistance they receive from the Government, thereby confining direct Government support for the pension to around 3% of GDP. This compares to projections of 5-11% in New Zealand over the next few decades." (Source: Office of the Retirement Commissioner)
He says the Australian system offers a good amount of choice in terms of contribution levels, how the investment is managed and income streams in retirement. "The system has been well accepted by Australians, and a key contributing factor has been the agreement between political parties on key elements, ensuring stability of the core system. However Australia must now work on enhancing the system in areas which are not working well. In particular, compliance costs are far too high."
John Drabble, General Manager of AMP Financial Services New Zealand, says that there is no perfect solution or quick fix. "What is clear, however, is that like the Australians, we must achieve multi-party support to ensure that our superannuation solution builds momentum over time. In order to plan for their retirement well in advance, New Zealanders need stability and certainty and a clear long-term picture."
"We should draw on the lessons Australia has learned in recent years, and decide for ourselves what is right for New Zealand. The New Zealand solution will undoubtedly involve compromise, and we need to address the question of balance between incentives and compulsion. But the fact that the superannuation issue is complex and vexed should not in itself be an excuse for not moving ahead."
Mr Drabble says that Government, individuals, employers and financial services companies need to work together to ensure that everything is in place for New Zealanders as they retire. "No one group can solve the retirement savings challenge on their own. This is a shared responsibility, and we must work together to develop a solution for the future."
"Retired New Zealanders can't survive on just a lump sum. They also need income streams, which can take care of their needs in retirement. To achieve this, massive behaviour change is required and New Zealanders will need to become more `engaged' about their retirement savings. Such change is slow and difficult, but achievable."
Mr Drabble says that employer sponsored superannuation will be a key element. "Our experience is that employer-sponsored super schemes are amongst the most popular benefits provided by employers, and are a key determinant in encouraging retirement savings. We see this as an integral part of the total solution, and AMP is already working with employers around the country to provide this support for employees."
Mr Drabble says that many New Zealanders find it difficult to plan for the future. "But the reality is that they need to plan ahead carefully to have the life that they want in the future. AMP is committed to helping New Zealanders achieve this."