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July 02 newsletter

Welcome to this election-special newsletter, part of our commitment to keep the Shape of Money subscribers informed about events that might affect their long-term saving and investment decisions.

In particular, the intention of this newsletter is to offer some help in deciding which political party will receive your superannuation tick in this month's election.

To that end, we did a little research, examining various reports from the Todd Taskforce, looking at recent media coverage of the topic and, of course, surfing the web sites of our political masters and their pretenders.

The following is our one-minute synopsis.

Contrary to the promises of the two major political parties, the Shape of Money does not believe that the current level of superannuation is sustainable in the future. The changing demographics of the New Zealand population signal a huge increase in both superannuation and health costs. Over the next 50 years, the Government will need to find up to an extra $5 billion each year for superannuation alone.

The current superannuation system is loosely based upon the recommendations and reports from the Taskforce on Private Provision for Retirement and Periodic Report Group.

The component of current policy generating the most media attention is the issue of how to increase national savings to a level that will help alleviate the five billion dollar shortfall.

The Labour Government has implemented the superfund, the National party is proposing tax exemptions, while NZ First still thinks that compulsory savings has legs.

the Shape of Money rejects these options primarily because the various parties can not front up to the electorate with the real issues. If they can't do that, we can hardly expect them to design a solution to a problem that neither they, nor their voters, know anything about.

Instead, the Shape of Money recommends reinforcing the current voluntary model with additional measures, such as education on retirement issues and reducing Government spending over the longer term.

ACT New Zealand gets our big superannuation election tick for explicitly saying that the country can't afford to maintain the current levels of entitlement. Their proposals for economic growth, income tax cuts and increasing the age of entitlement, may not be the panacea that New Zealand is looking for, but "they're an excellent contribution to the overall superannuation debate".

In summary, the Shape of Money's recommendation to its subscribers is that, "in planning for your retirement, you can't rely on a Government-provided retirement income."