"Women need sexist rules removed", I appended a recent tweet on super.
An astute follower shot back: "I have plenty of critiques of #superannuation but what are the sexist rules?" And fair call.
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Closing the gender retirement gap
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That's the trouble with Twitter – 140 characters means you have to leave out a helluva lot, particularly when it comes to super. With the luxury of a few more letters here, these are the three basic problems:
1. Super is earnings based. The average woman currently earns 19 per cent less than the average man, says the Equal Opportunity for Women in the Workplace Agency. This builds to $1m over a lifetime, according to the Australian Council of Trade Unions. A lot of women still also opt to take work 'breaks' to raise children. If men are in lower paid jobs and/or choose a career pause in order to corral kids, same deal. (And any full-time carer, of course, gets nothing.)
2. Super has some silly rules. You have to earn $450 a month from the one employer (and work more than 30 hours) before they have to pay you super. That's inconsistent with how many people phase back into work as their kids get older and more independent: with low, sometimes ad hoc hours and often multiple employers. There's also no super paid on government parental leave payments nor is it required on any corporate scheme.
3. Super is supposed to last a lifetime. The ABS tells us that, on average, a lifetime is four years longer for a woman.
So it's accident not intent that, generally speaking, super is failing females. Today women retire with an average balance of just $105,000 versus the average man's balance of $197,000, says the Association of Super Funds of Australia.
And ANZ research shows a large chunk of baby boomer women can expect to outlive their super by 16 years.
This is so serious I've dubbed it the new GFC – Girls' Financial Crisis – and Treasurer Scott Morrison last week put on record his concern, raising the prospect of changes to make super more equitable.
Here's my wish list for everyone currently discriminated against under our skewed super system.
Fix 1. Don't resurrect Tony Abbott's rolled-gold paid parental leave scheme, but for goodness sakes adopt its proposal to make super applicable to parental leave payments, no matter which parent takes them. The loss of these early contributions hurts disproportionately because compounding doesn't have time to work its magic. Modelling from actuaries Rice Warner shows a fairly typical five years out of full-time earning will slash $46,000 from a super fund, which means it will run out three years earlier. (This is also pretty conservative as it assumes only two full years off for two children, and part-time work the remainder.)
Fix 2. Remove the ridiculous $450-a-month qualification threshold above – irrespective of gender. Sure, it saves a bit of admin but it does a lot of damage. A recent ASFA report estimated 250,000 people a year completely miss out on super as a result.
Fix 3. Increase contribution caps that limit the annual amount you can put in, as reportedly under consideration, for anyone who's had time 'out of the system'. This would allow you to make up missing moolah with extra contributions down the track – one year out could mean, say, you are allowed to put an extra $1000 a year in. (But remember compounding – actually mopping up your full annual contributions cap in the years before children would produce a far better result. Industry Super Australia says you typically get double the benefit from money you pay in at this stage, as opposed to contributing the same amount later.)
Fix 4. Retain the low income super contribution. This stops people earning less than $37,000 paying more tax on super contributions than on their earnings, with a refund of the contributions tax deducted (up to $500). But it's a Labor policy now scheduled to end in 2017, which will effectively remove the incentive for these people to save for retirement. Almost 4 million lower earners would be affected.
Fix 5. Reinstate the like-for-like government co-contribution, which was halved back in belt-tightening budget 2012, and extend it to people who aren't earning. This is 'free' money for those currently on salaries less than $50,454 (reduced in budget 2013) who also make a $1000 super contribution. It would dramatically bolster the super of those who need it most.
Many of these changes would be expensive. But this is a huge problem that will ultimately cost a country grappling with a skyrocketing pension bill a lot more.
We need sensible, non-sexist change.