How to make super work for women

The biggest step the government could take to improve women’s super balances is to increase the superannuation guarantee to 12 per cent.

Is it inevitable that women will end up with less superannuation in retirement? Women’s superannuation issues are certainly unique. Here’s why.

The Workplace Gender Equality Agency estimates women accumulate only half as much superannuation as men due to factors such as the gender pay gap, and the fact that women are more likely to work part-time or take time out of the workforce for child rearing.

However, there are many policy initiatives – and steps women can take themselves – that could shift the dial. Joint research by industry fund AustralianSuper and Monash University, The Future Face of Poverty is Female, has some ideas.

Scrapping the A$450 threshold for paying super is one. Currently, employers with staff who earn less than A$450 a month are not required to make contributions for these staff.

“This would be of huge benefit to women and low-income workers who are often the most likely to face economic insecurity in retirement because they have inadequate savings in superannuation,” says Rose Kerlin, group executive membership at AustralianSuper.

“The changing nature of the workforce in the 21st century and advances in technology mean this threshold is outmoded and denies the superannuation guarantee to both low-income earners and the increasing number of casual and contract workers,” she says.

How to help women build superannuation

Kathleen Riach, Monash Business School associate professor of management, one of the authors of the research, agrees with scrapping the A$450 threshold.

“We know women are more likely to have multiple, low-paid jobs – for example, they may have three jobs each paying A$400 a month. Scrapping the threshold would also ensure employers don’t try to play the system by deliberately limiting employees’ hours to get around it.”

Kerlin says, however, the biggest step the government could take to improve women’s super balances is to increase the superannuation guarantee to 12 per cent. Presently the guarantee is 9.5 per cent and it’s not scheduled to reach 12 per cent until 2025.

She acknowledges the imposition on employers, but says prolonging the delay in the rise of the superannuation guarantee will see another generation of women facing poverty in retirement as a direct result of inadequate retirement savings.

Raising super caps

Rethinking the super contribution caps could also make a difference to women at retirement, says Michael Davison, senior policy adviser – superannuation at CPA Australia.

“You should be able to contribute to your superannuation when you need to, within reasonable limits,” says Davison.

“The caps we have at the moment are very restrictive because they don’t allow you to contribute the most to your super when you are able to, for instance when you’re in a higher-paying job. Even the ability to bring the caps forward or make catch-up contributions is still very restrictive.”

Davison says the best opportunity to do this in an equitable way would be to have a lifetime cap, which wouldn’t just help women in the workforce, it would also help self-employed women.

Riach agrees with the lifetime contribution allowance.

“But this will by no means solve the problem, as research shows women are likely to have lower incomes and therefore the possibility of having a discretional amount of money they can use to top up their super is unlikely in the majority of cases.”

Lifting the low-income super tax offset

However, Davison does not agree about lifting the low-income superannuation tax offset, under which the federal government may contribute up to A$500 to the super funds of people earning A$37,000 or less.

“A better question is whether we should be increasing the co-contribution,” he says.

Under the co-contribution, the government contributes 50 cents for every after-tax dollar contributed to super up to A$500. It has previously contributed A$1.50 for every dollar up to A$1500 to low income earners’ super funds.

“There was a lot more benefit previously and the co-contribution did more to help encourage financial independence,” Davison says.

Lowering the tax on super

Another option is to remove the 15 per cent tax payable on money entering the super fund and instead tax income drawn from the fund at the member’s marginal tax rate.

“This would make it a lot fairer and simpler,” he says.

Aside from policy changes, there are other steps women can take to increase their super balances.

“Choose a fund you trust that has lower costs and better investment earnings, consolidate your super funds, and contribute as much as you can,” says Kerlin.

Riach also points to how-to guides published by groups such as Women in Super that provide practical tips.

“But these are really tinkering at the surface of a broader structural problem. We currently have a superannuation system that was built on a rather traditional idea of a working life as linear, continuous and gradually progressing upwards. We know from our research this simply isn’t the way a lot of women’s careers happen,” she says.

“Given this, perhaps it’s time for us to be a bit more ambitious beyond individual choice narratives. As a nation, we could think more creatively about how we ensure a decent level of financial security for everyone, and that’s the responsibility of government, superannuation funds, and society.” 

Read next: Is the superannuation guarantee a barrier for women, low-income earnings and those with multiple jobs?

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October 2021
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