19 Jun 2012

Key rejects industry call for new super policy

6:04 am on 19 June 2012

Prime Minister John Key says he rejects calls from the Financial Services Council for a dedicated parliamentary committee to develop a new retirement policy for New Zealanders under 40.

Mr Key says such a move is not necessary, even though 15 of the 31 OECD countries are proposing to raise their retirement ages to 65 or higher.

But 14 of those OECD countries currently spend 9% of their economic output on taxpayer-funded superannuation while New Zealand spends just 4.6%, he says.

The Financial Services Council, representing companies that manage savings and provide financial advice, has warned changes need to be made now to avoid a superannuation cost blow-out in coming years.

It says a cross-party select committee should consult the public and then draft a bill to introduce to Parliament next year.

The council says in order to achieve long term stability, the bill should have 75% support in Parliament and if it fails to do so, New Zealanders should then have the opportunity to express their views in a binding referendum.

Flexi-super idea

Meanwhile, United Future leader Peter Dunne says his party's 'Flexi-Super' idea is gaining momentum, with more parties in Parliament open to investigating the proposal.

Under the proposal, the age of entitlement for superannuation would remain at 65, but there would be options to take up super at a reduced rate before then or at a higher rate after that age.

Labour and ACT have indicated they are willing to discuss the proposal, and Mr Dunne says the Maori Party is also interested.

National agreed to investigate the idea in its confidence and supply agreement with United Future.

Mr Dunne says he has discussed it with Prime Minister John Key and Finance Minister Bill English in the past week, and the work will probably go ahead next year.

"There's still some work to be done but it's probably going to be in the first half of next year ... once the periodic review that the Retirement Commissioner is due to undertake is under way and once some of the ideas that are floating around at the moment have had time to mull around and be considered more widely."

Higher KiwiSaver contribution 'no help'

Former Reserve Bank governor Don Brash says increasing KiwiSaver contributions would do nothing to cut the cost of superannuation for the Government.

His comments follow a report by the Financial Services Council that argues raising KiwiSaver payments to 10% would mean the age of eligibility for superannuation would not have to be raised from 65.

At present, the minimum total contribution by employer and employee is 4% of wages and is due to increase to 6% next year.

Dr Brash says increasing workers' contributions will mean more private sector savings will not not reduce the cost to the Government of New Zealand Superannuation, unless means testing is brought in at the same time.

He says there is no public appetite for any form of means testing, and the easiest and most accepted approach appears to be gradually increasing the age of eligibility.

Retirement Commissioner Diana Crossan says compulsory saving is difficult for a lot of families and can also stop people investing their money into their businesses.