Minister predicts shift in pensions

Press, 26 February 1977, Page 3

Minister predicts shift in pensions

PA Auckland The Deputy Minister of Finance (Mr Gair) believes that now national superannuation has been established demand for lump sum pension schemes will be j quite strong. In a speech to the Auckland branch of the Life I Underwriters Association, he said the new superannuation regulations restored the "more flexible frame-work” which existed before 1973, enabling schemes to provide benefits in either a lump sum or pension form. A most obvious change from before 1973 was the fact that the Government actuary continues his role as a superannuation scheme approving authority, in the place of the Commissioner of Inland Revenue. Requirements for the trustees of superannuation schemes to make annual reports to the actuary were slightly more extensive than those required by the Commissioner of Inland Revenue before 1973. But these .were not as extensive as required under the 1974 act. Mr Gair said that perhaps the most important impact of the measures would be enabling savers to earn a reasonable return on funds by lifting a wide range of controls on institutions and interest rates, "To this extent pension schemes will be able to provide reasonable benefits for their members on a more secure basis.’-’ Further protection for scheme members was given by a mandatory requirement for the financial position of schemes working on the basis of unallocated funding, or which paid annuities, to be examined by an actuary at least every three years.

' “Certain changes have also .been made to the investment criteria of superannuation schemes, in particular the amount that may be invested by way of lease backs and mortgages in the employer company, or an ■associated company, is limited to 25 per cent of the market value of the scheme's investments. "Within this over-all limitation no more than 5 per cent of the value of investments may be invested in shares, debentures, rights, notes or other securities issued by the employer or associated company." Mr Gair said the 5 per cent, rule existed before 1973 although mortgages a.nd leasebacks were not included. He added that to the extent that the Government’s March monetary measures would lead to higher returns on a wider range of financial instruments, it was unlikely that these criteria would in any way inhibit the earning ability of superannuation schemes. “It is the Government's view that these regulations provide for a generally flexible framework while at rhe same rime protecting the rights of individual members without being unnecessarily heavy-handed.” Mr Gair said he believed the national superannuation scheme would bring changes in the insurance industry, but he thought people would begin to explore the possibilities of saving through insurance for intermediate goals—overseas trips, a new house and similar objectives. In his view there would be a greater emphasis on straight insurance cover as opposed to endowment policies.