Dr Cullen's criteria for tax incentives for saving for retirement Home
At the Superannuation Funds of New Zealand AGM on Tuesday 30 April 2002 Dr Michael Cullen outlined outlined five basic criteria that an incentive scheme would have to meet:
1. It must encourage genuine savings, not simply the temporary diversion of spending through vehicles that qualify for the tax break.
2. It must limit the switching of past savings into a tax-advantaged form.
3. It should increase net new savings into the future, and not simply divert what might be saved in the future down new avenues.
4. It must be broadly equitable (although this is difficult to achieve given that a precondition for an equitable incentive regime is that lower income groups have the capacity to save).
5. It should have a kind of 'multiplier effect' in that it changes attitudes and habits, and contributes to a shift in the savings culture. Incentives that rely purely on a 'bribe' effect tend to limit the net longer-term benefits that they produce.
My scheme fulfills four of these five criteria: The remaining criteria is not relevant:
1. It will encourage genuine savings
2. Not relevant - tax switching can not occur in my proposal - it is tax neutral
3. It will increase net new savings into the future
4. It is broadly equitable
5. It will change attitudes and habits, and contribute to a shift in the savings culture.
Commentary on Dr Cullen's proposals from Network Communications
Governmenrt's statements on superannuation
