KEY POINTS:
How the mood has changed. Ten years ago, when the country was asked by referendum whether it wanted a compulsory superannuation plan, the idea was rejected by 93 per cent of the voters. This month a Herald-DigiPoll survey asked whether saving for retirement should be compulsory and, as
reported in the Weekend Herald, 63.4 per cent of respondents said yes. Why the change? Politics, in a word.
The 1997 superannuation plan was proposed by Winston Peters when he went into coalition with National after the first MMP election. It was opposed from all corners of the House, including National. The left objected to its individualised accounts, the right did not like compulsion. One of the most prominent critics was National MP Jenny Shipley, who would topple Prime Minister Jim Bolger the following year and drive Mr Peters out of the coalition.
All of that seems a long time ago and much has happened on the superannuation front since. Labour-led governments have set up the "Cullen fund", which puts some of the annual Budget surplus aside for investments that might cushion the cost of pensions when the baby boomers retire. And from July the Government's KiwiSaver scheme will force employers to pay a portion of wages into a portable personal savings account if an employee chooses to have one.
Newly hired fulltime employees who are not already in a superannuation fund will have KiwiSaver contributions automatically deducted from their pay unless they take steps to opt out. The Government is banking on inertia rather than enthusiasm for its take-up. And indeed there is little enthusiasm for the scheme, despite the sweeteners the Government has provided. Subscribers will get a gift of $1000 to start and, after three years, the chance to draw on their account for a deposit on a first home.
Yet the Herald-DigiPoll survey found more than two-thirds (68 per cent) of its sample did not belong to a retirement savings scheme and, of them, less than a quarter (22.8 per cent) intended to join KiwiSaver when it starts in July. Half were adamant they would not join and the rest were unsure.
Some of those who are not inclined to join the scheme must be among the 63.4 per cent of the survey who believe saving for retirement should be compulsory. Their attitude is not entirely contradictory. Sometimes it is not in an individual's interest to do the right thing unless everybody else does. Thus a person living hand to mouth may be reluctant to lower his present living standard for the sake of his future welfare unless everybody in his position has to do the same. Living standards are relative and if everybody must forgo some present income nobody will feel relatively worse off.
Compulsory saving for retirement is common in many comparable countries, including Australia, and should apply here. While liberals argue that the individual is the best judge of his present and future welfare, they do not suggest that an individual who leaves himself destitute in old age should be left to starve. A society that accepts a duty to support the aged has a right to insist that those with the means make provision for themselves.
In a speech on Friday Winston Peters called for the Cullen fund and KiwiSaver to be turned into a fully fledged compulsory superannuation fund with individual accounts much as he proposed 10 years ago. He was right then, as we were among the few to acknowledge at the time, and he is right now. Compulsory saving would be good for domestic investment, helpful for first-home buyers, relief for future taxpayers and fair to the next generation. Now that the political climate has changed, it can be done.
