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Warren Ingram, a Director of Galileo Capital and the Financial
Planning Institute’s Financial Planner of the Year in 2011, has his
doubts. ‘I like the approach that the Treasury is taking,’ he says.
‘Some of the proposals are interesting and a notable step forward,
but none of it is really going to be effective. The only way to get
people to save more is if they are forced to do so. This is especially
true of a country that has so many people who are not financially
literate.
‘Even in a sophisticated country like the United States, people
are not good savers; America is a prime consumer culture.
A country like Singapore, however, has a great savings culture –
because employers are obliged to pay the money into compulsory
pension schemes.
‘The only sure way to ensure that people save is by making it a
requirement of the law for employers to deduct a certain amount,
for example 10 percent, from employees’ salaries and to ensure this
amount is not accessible until the employee reaches a certain age.
This is the case in nine out of ten of the countries that have built a
sound savings base.’
Another factor militating against savings, he says, is the welfare
systems that exist in many countries. A case in point is China.
While Chinese people have an innate culture of thrift and saving,
part of the reason for this is that they do not enjoy the social
safety-nets that exist in many countries – they must themselves
save and provide for expenses like their children’s education, their
medical expenses and their retirement.
‘Once people have got used to providing for themselves through
statutory savings, a culture of saving can be developed,’ says
Ingram, ‘but let’s start with the law.’ Writes Jonathan Hobday ■
Ref: National Treasury, Incentivising Retirement Savings, Technical
Discussion Paper D for public comment, 4 October 2010.
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