KEY POINTS:
A Generation now in retirement made a decision in 1975 that was to be more fateful than it possibly realised. It elected a government committed to cancelling a funded public superannuation savings plan. National was the Government, and this newspaper's editorials played a prominent part in turning public
opinion against the previous Government's savings scheme.
The main objection at that time was to the potential economic power of so large a fund under the state's control, and the fact that it would take 40 years to provide its full benefit. National's leader, Sir Robert Muldoon, decided the state could pay the same benefit immediately with no need of compulsory savings. Once elected, he abolished the fund, raised the pension as promised - and the country has been wrestling with it ever since.
National must not make the same mistake again. The tide is turning against Labour, just as it was then. The savings scheme will be barely a year old by the next election, not much older than Labour's scheme in 1975. It could easily be reversed if National comes to power, just as then. But the electorate is different now.
Wiser, perhaps, for 30 years of argument over devices to keep national super affordable, conscious also of the savings that would have been providing domestic capital for investment, and acutely aware that the baby boom will be retiring from 2011, today's taxpayers seem well disposed to Labour's state-sponsored savings plan, KiwiSaver.
The scheme starts on July 1. Wage and salary earners, who must decide whether to join, have a right to know whether it will survive a change of government. National has said it will retain KiwiSaver, but it has yet to endorse the tax incentive and compulsory employer contribution announced in last week's Budget.
National was particularly aggrieved at the employer contribution, more aggrieved than employers seem to be. A contribution, which employers can set against tax and count in the employees' total remuneration bargain, is not an unusual requirement in economies with a better savings pool than ours.
The tax credit is more questionable. The Treasury has long argued against tax incentives for private savings on the grounds that the benefit goes to those who have surplus income to save, and probably are saving already, while forgone tax revenue is a cost on services to everyone. National's preference is a tax reduction across the board, which people can save or invest or spend as they wish.
But for now, and the future as far as anyone can see, the economy needs savings more than it needs additional consumer spending or investment in the most trusted and tax-favoured form of savings, real estate. So it seems only prudent to entice people to put their spare cash into funds that keep it locked into a better spread of investments and pay out only for a first home or retirement at age 65.
National under John Key has been prepared to endorse several of Labour's initiatives, including the "Cullen fund" that puts aside some of the annual Budget surplus to help pay the public pension to the baby boomers in retirement. The KiwiSaver scheme is different but complementary. It will build up accounts in the name of individual taxpayers to return them a benefit, by lump sum or annuity, on top of the public pension.
National will probably endorse the terms of KiwiSaver in time. With July 1 fast approaching, the party would do everyone a favour if it comes to a decision quickly. There will be other issues to exploit at the next election. Let's put superannuation savings beyond political opportunism once and for all.
