THE SOAPBOX: Women and carers ignored by super law-makers

I first wrote about the unfairness of Australia’s super system for most women in the Melbourne Age in July 2007. Incredibly, nothing has changed during the past two years. In the hope that those reviewing the super system (see article, ‘Another super review: who’s looking out for consumers?’) are reading this website, I think it’s worth revisiting my comments.

Since July 2007, Australians aged 60 or over, and retired, can now receive their superannuation benefits tax-free, at least that was the message contained in the Government advertising campaign promoting the super changes. What the TV and newspaper ads didn’t say is that you need a lot of superannuation to benefit from the changes that introduced tax-free super for over-60s.

If you hold less than $145,000 in super (or $150,000 for 2009/2010 year), you would have received your super benefits tax-free anyway under the old super rules that applied before July 2007.

For the average Australian thinking about retiring now, they hold nowhere near $145,000, which means they may receive no real benefit from the carrot of tax-free super. (I hasten to add however that I fully support tax-free super for over-60s because it encourages those who can afford to be financially independent in retirement to start planning earlier, and to be less likely to rely on the Age Pension.)

According to a report released by the Association of Superannuation Funds of Australia (ASFA) in June 2007, the average retirement payout for men retiring in the 2006/07 year is likely to be $130,000 while women, on average, will receive a meagre $45,000, which gives an average retirement payout for Australians of $90,000. A later ASFA report, released in December 2008, indicated that average retirement payouts had not increased since 2007 due to the recent falls in investment markets.

Although alarming, the payout figures are not surprising considering that the Superannuation Guarantee (SG) system was only introduced in 1992, and only required employers to make super contributions representing the equivalent of 9 per cent of an employee’s salary from 1 July 2002.

For most men retiring today, who relied only on SG, they will be seriously underfunded for their retirement and they can expect to rely on the Age Pension. The retirement story will have a much happier ending for works currently in their 20s and 30s who can expect a lifetime of SG contributions.

The reasons underlying the low payouts for women are more disturbing and can be traced back to discriminatory work and superannuation policies over the past 50 years or so. The workplace was unkind to women in the fabulous fifties and the swinging sixties. Only employees in full-time work, and invariably male employees, were offered entry to company super funds. Women in the workforce were mainly single or divorced women, and women were paid half the money that men were paid for the same job until the laws were changed in 1975. Even now, according to countless studies, women are paid less than men in similar roles, although the gap is closing.

Today, family responsibilities, including rearing children and caring for elderly parents, still predominantly fall on women’s shoulders. Women, if working, are more likely to have part-time work rather than full-time work, although female participation in the workforce is increasing.

Superannuation policies reflected, and still reflect to a great extent, the culture of the times. The biggest superannuation issue for women continues to be time out of the workforce because virtually all superannuation policies are linked to work.

So, what has the Federal Government done for women who are seeking to have a better life in retirement? Not much.

Superannuation Guarantee still only applies to workers earning more than $450 a month, and women on paid maternity leave are still not entitled to SG (although at least this issue is now being discussed).

One of the more innovative Government super policies, the co-contribution scheme, promoted as a female-friendly policy, excludes many women, because it is only available to the self-employed (since July 2007) and employees. The co-contribution scheme involves the Government paying a tax-free super contribution of up to $1500 each year, if an individual makes a $1000 after-tax contribution each year to a super fund, but you have to be working.

If Senator Sherry wants to achieve a quick win from the upcoming super review looking at how the super system operates, then I suggest the Government widen the co-contribution scheme to include stay-at-home mums (and dads) and full-time carers.

It’s only fair.

I explain how the co-contribution scheme operates in my article ‘Cash in co-contributions – free, and tax-free’.

Related articles:

1. THE SOAPBOX: My top 10 super wish list for Australian consumers
2. THE SOAPBOX: Show mercy on contributions caps, for votes’ sake
3. THE SOAPBOX: Defending decent SMSF trustees
4. Top ten problems with our super system, and how we can fix them
5. Over-50s contributions cap of $50,000 now permanent, for some