Association warns time running out for national superannuation

Press, 3 April 1987, Page 14

Association warns time running out for national superannuation

By

CLIVE McKEEF,

NZPA business reporter Wellington New Zealanders who look forward to a comfortable retirement drawing their "national super” are in for a nasty shock within the next 10 to 15 years, the Life Offices Association of New Zealand predicts. National Superannuation is costing the taxpayer so much in the present form that no matter which political party is the Government the “old age pension” or national superannuation which New Zealanders have enjoyed since the 1890 s will have to be greatly reduced. Already, national superannuation was taking 20

per cent of all tax revenues collected by the Government, and as the proportion of people in the population over 60 years of age increased, the taxpayer would simply not be able to afford "national super” in the present form, said Mr John Dingle, the chairman of the Life Offices Association of New Zealand. At present each superannuitant is supported by the taxes of three people in the workforce but within 15 years there will be only two people in the workforce to support each superannuitant This ageing or “greying” of the population is an inescapable fact of demography that is facing most countries in the

Western world as the “baby boom” of the 1950 s and 1960 s and the use of family planning and contraception in the 1970 s and 1980 s means the proportion of the population of retirement age is increasing rapidly. About 1.2 million New Zealanders are covered by “whole life” or endowment life insurance policies but only about 40 per cent are covered by private life insurance schemes, which is low by international standards, said Mr John Errington, of National Mutual Life. Yet the Government introduced a new tax regime for life insurance and superannuation companies in 1985 which did little to encourage people to provide for themselves,

he said. Existing policy holders can still deduct their life insurance or endowment policy premiums for tax purposes, but new policyholders cannot’ Superannuation contributions are tax deductible, but the insurance companies are then taxed on the income from the monies invested on behalf of policyholders. Ideally, there should be a “tax deferral” so that tax is only levied when superannuitants receive their pensions, the Life Offices Association says. At present, life insurance and superannuation companies pay tax at an average rate of 33c in the dollar on the returns on policyholders’ money, but can deduct only expenses

specifically relating to investment income, unlike other businesses which can deduct all of the expenses of producing income. The National Party announced a superannuation policy last year, but there has been no sign of the “green paper” discussion document the Government promised three years ago. The ~ Life Offices Association would not be unhappy jf superannuation became an election issue, but fears that the “vote-buying exercise of National’s 1975 campaign,” which led to the present National Superannuation scheme, would not be in the New Zealand taxpayer’s interest.