| Annual Review 1999 - Chairman's Report |
"The industry is evolving to meet the
needs of its customers... but is hampered in its efforts by the disincentives created
by the current legislative framework"
"The ISI is always ready
to work with Government and Opposition parties to achieve a
neutral environment for savings and investment...certainty about the level of public
pension provision in the future would go a long way towards persuading people to accept
responsibility for their own income in retirement."
"The ISI Board is deliberately
taking a much more pro-active stance than previous industry organisations have done, since
we believe that the issue can be resolved to the benefit of New Zealanders"
THE ROLE OF INDUSTRY
ASSOCIATIONS IS DEVELOPING WITH CHANGES IN THE SHAPE OF THE NEW ZEALAND MARKET-PLACE, AND IN THE
WAY COMPANIES - AND THEIR CUSTOMERS - DO BUSINESS
Members of the Investment Savings and
Insurance Association (ISI) provide a range of financial services to the public, including
risk cover such as life insurance or income protection, superannuation, managed funds, as
well as mortgages and cash management trusts.
The ISI represents the majority of fund
managers and life insurers in New Zealand, and seeks to encourage sustainable government
savings policies and a taxation playing field that doesn’t discourage the public from
saving.
The industry is evolving to meet the
needs of its customers at the end of the twentieth century, and into the next, but is
hampered in its efforts by the disincentives created by the current legislative framework.
Companies can and do design products to address the various protection and savings needs
of the population but their uptake will always be limited by the non-neutral environment
in which they are issued.
The products with which ISI members seek
to meet customers’ savings and investment needs may be taxed under any of five
different taxation regimes. Coupled with that, investors may be penalised by the effects
of capital gains tax which they would not have to pay if they had invested directly and/or
by having their investment earnings taxed at the top tax rate, rather than their own lower
marginal rate.
The ISI has gone to great lengths to
explain to policymakers the impacts that tax and superannuation policies have upon New
Zealanders’ savings decisions. Although that impact has been acknowledged, no remedy
is yet in sight. The ISI and other industry bodies spent considerable time and effort
working with Inland Revenue and other officials in the Tax on Life Insurance and
Superannuation (TOLlS) working group to decide on the most appropriate regime for taxation
on savings in life insurance and superannuation products. While we would have preferred a
reduction to the current proxy rate of taxation, rather than the Tax Credit System that
was presented to Parliament, it was disappointing that the legislation did not
pass, and no changes have been made.
The ISI is always ready to work with
Government and Opposition parties to achieve a neutral environment for savings and
investment in New Zealand. We believe that certainty about the level of public pension
provision in the future would go a long way towards persuading people to accept
responsibility for their own income in retirement. The Retirement Commissioner has
educated the public on the need to save. It is now up to whichever parties form the next
Government to pull it all together into a generally accepted policy within which New
Zealanders can feel confident about making long-term plans.
The ISI Board is deliberately taking a
much more pro-active stance than previous industry organisations have done, since we
believe that the issue can be resolved to the benefit of New Zealanders.
We are forming increasingly closer
relationships with other like-minded industry organisations, to ensure that the financial
services industry presents a consistent message to those audiences who have the power to
influence its operating environment.
We remain committed to achieving a
fairer environment for New Zealanders who wish to save and invest. In this way, we will
advance the mission of the ISI, which is:
To play a significant role in the
development of the social, economic and regulatory framework in which our members operate,
with the objectives of:
• achieving growth in the industry;
• promoting integrity in the
industry; and
• developing a strong, cohesive
industry body.
On behalf of the members of the
ISI, I would like to thank Vance Arkinstall, chief executive, and his staff, for promoting
the vision of the ISI, and carrying out the work needed to persuade people of the need for
urgent change.
Ross McEwan
Chairman
