August 15, 2010

Time is right for compulsory super savings

DPF over at Kiwiblog remains opposed to compulsory super because he is concerned that politicians of one stripe or another will eventually be tempted to spend the money on a pet project - rather than on funding citizens' retirement.  What he overlooks, however, is that we already have a risky arrangement in place.  It is called income tax and national superannuation. A new compulsory savings scheme should tag all funds for funding citizens' retirement and should be in the name of specific individuals.  It should not be accessible for spending by government - unlike the present tax & spend arrangement.

The main benefit of a compulsory retirement savings scheme would be reduce New Zealand's dependence on overseas savings and capital for investment.  The consequence of decades of borrowings - largely to fund housing - has been to increase the per capita debt of NZ towards to Icelandic proportions.  A sovereign state cannot continue with such an approach without either the receivers one day being called in -  in the form of the IMF in the case of countries -  or dramatic reductions in citizens' living standards. Neither prospect is something New Zealanders can be blase about.  Here's hoping the government has the courage to move to a compulsory retirement savings scheme - with safeguards to keep politicians away from our nesteggs.

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