The contention in the NZ Herald Editorial today that compulsory superannuation is the answer to our economic and savings "problems" is wide of the mark on most points:"So compelling is the case for compulsory superannuation that it is a mystery why the Government is setting up yet another working group...it is not a question of whether there should be compulsory superannuation but when and how it should be introduced".
What happened to personal choice and the attractiveness of a savings package alone that would have individuals flocking to save for their future?
There is one thing that I agree with the editorial writer on. That is the Government should do something.
On what should be done by them though the editorial writer and I strongly disagree.
The Herald wants the government to force individuals into saving. Force them into low quality saving based on compulsion rather than the quality of the investment.
I would contend that the government only need provide incentive and therefore choice for individuals to save for themselves by removing the obvious tax barriers that all investments, bar investment property, are weighed down by.
Make investing tax free, or lower taxed for you socialists out there (mind you you would want me to pay for your retirement) and people would be saving and saving more. The only decision they would have to make is who to go with.
This, by and large, will provide choice, quality, personal responsibility and good returns over the long-term.
It is proven that we will invest when there is a good incentive and we freely invest in rental housing when there is a clear advantage to that investment and this sector has boomed.
A government mandated compulsory savings scheme is doomed to failure - the recent failure of Kiwisaver is a case in point. Government schemes have always been failures and always will be - seen anything positively successful any Government has done..well duhhahhh!. They distort the economy and have provided poor returns.
The Herald sees compulsion as the answer to providing local capital to grow business and the economy. Lowering or taking the tax off buying and holding shares would have much better results than compulsion and the added benefit is that you get to choose what you invest in!
Imagine that actually choosing what to invest in based on its financial merits rather than compulsorily investing in any old investment garbage.
The Herald is right, we need to save and invest in our future.
Personal responsibility and choice though are better reasons to save than being told you should put your money into an undefined, uncertain, government mandated super scheme. Schemes that are open to political manipulation and the self interest of bureaucrats and State sanctioned financial advisors.
We cannot trust compulsion, only personal choice when it comes to investing in our future.
Compulsion without real incentive always fails.
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Darren - Everyone points to Australia's Compulsory Super as a success.
ReplyDeleteI dont think you can say Compulsory Super doesn't work without addressing that specific point - Follow up post maybe.
Note: Australia allows self managed funds which would alleviate some of your concerns. Some Kiwisaver funds allow this to a limited extent and I think as personal accounts get larger (needs to be atleast $100k to be worthwhile), this will become more of an option.
Hi there anon, really, is it?
ReplyDeleteWhat are the overall returns?
Imagine how much better it would be if their system was based on merit of saving rather than the vagaries of government led compulsion.
I will never be convinced that compulsion is better than choice and merit in any part of life.
Choice always leads to better outcomes if you take personal responsibility for what you do, or in this case how you save.
I am not saying it is. I am just saying everyone points to it as a huge amount of savings and wishes NZ had the same.
ReplyDeleteSince that is the main thing those in favour point to, you need to contradict it.
Hi Anon, I think I have contradicted it and argued it quite well. There maybe a large amount of moola in the Aussie honey pot under a socialist compulsory system but I would argue there would be more if it was a merit and incentive based system instead.
ReplyDelete