Problems with pre funding NZ Super

capital-gains/united-states/

2 October 2001
| By Phil Macalister |

A LEADING United States superannuation expert says the New Zealand Government’s plans to prefund New Zealand Superannuation are commendable, however he says there are two major problems.

Robert Pozen, vice-chairman at Fidelity Investments and appointee to a Presidential Commission on Social Welfare (superannuation), says the two big problems with the prefunding proposal are the clause relating to ethical investments and New Zealand’s peculiar tax system.

Pozen says the clause in the bill designed to appease the Green party is meaningless and “is a problem waiting to happen”. The clause “has the potential for a lot of mischief,” he says.

Pozen believes it is very wishy-washy and doesn’t spell out any ethical, or socially responsible mandate.

“You will find that managers have an excuse for not having good returns.”

No fan of ethical investing, Pozen believes managers should be able to invest in whatever assets or companies get the best returns. He says the fund flows into these funds is being “grossly over-estimated” by some people.

The second problem is that the fund’s guardians will be forced towards investing in passive funds because of their tax-favoured status.

Pozen says New Zealand’s capital gains tax regime is “extremely unusual”.

“New Zealand is the only country I know of in the developed world which has this distinction between active and passive.”

Overall though, Pozen says prefunding is commendable.

—By Philip Macalister

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 1 week ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

3 weeks 1 day ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

2 weeks ago

One licensee has lost 27 advisers in the past week, now sitting at zero, according to the latest Wealth Data figures....

3 weeks 1 day ago

TOP PERFORMING FUNDS