As we count down to this year’s Federal budget and we hear rumours of the strongest budget for a decade, the Association of Superannuation Funds of Australia (ASFA) calls upon the Federal Government to use this opportunity to progress structural policy reforms to protect and enhance the economic security of women in retirement.
Despite increasing workforce participation by women, there still remains a significant disparity between the retirement incomes of men and women.
Both the incidence of having superannuation and average account balances are higher for men than for women.
The average superannuation balances achieved in 2015/2016 for persons approaching retirement (age 55 to 59) were $237,022 for men and $123,642 for women.
For women in particular this is well short of the $545,000 needed for an individual to achieve a comfortable retirement.
At the moment more than 80 per cent of women are retiring with insufficient superannuation savings to fund a comfortable retirement.
ASFA CEO Dr Martin Fahy said it is important to take steps to close the gap, to ensure women are not condemned to experience poverty, and even homelessness, in retirement.
“Homelessness Australia has identified older single women as one of the groups who are especially vulnerable to experiencing homelessness. Older single women may be forced out the workforce early, have insufficient superannuation to fund the cost of living and face discrimination in the housing market” he said.
In light of this, ASFA has released a paper on Women’s Economic Security in Retirement.
“While there have been positive initiatives to help economic security for women in recent years, including the Government’s reforms to allow the ability to carry forward unused concessional caps and the refunding of superannuation tax for low income earners, there is more that can be done in this budget,” said Dr Fahy.
Some of the potential key reforms identified include lifting the Superannuation Guarantee (SG) to 12 per cent, applying SG to the self-employed and to income replacement payments, removing the $450 a month threshold for SG, reforming the Anti-Discrimination Act, allowing access to super in cases of domestic violence, and improving the operation of family law and super splitting.
Additional information
- One of the key reforms would be to lift the Superannuation Guarantee (SG) to 12 per cent as soon as possible – this will positively impact on economic security for women
The current levels of superannuation savings do not provide economic security in retirement for a significant proportion of the Australian population. In 2015/2016 the median amount of superannuation for those aged 60 to 64 was $110,000 for men and $36,000 for women, well below the $545,000 (single) and $640,000 (couple) needed for a comfortable retirement according to the ASFA Retirement Standard.
Increasing SG will have a material impact on retirement security for women. For example, Ann is a thirty-year old park ranger and earns $60,000 per year, and currently has a superannuation balance of $20,000. With the SG rate increasing to 12 per cent by 2025, Ann will have $422,000 in superannuation savings at retirement (age 67).
This is around $66,000 more than if the SG remains at its current rate. Ann will have a higher standard of living in retirement if the SG rate increases. With an annual income of $40,900, compared with $39,200, Ann will be able to afford to have a holiday or pay for unexpected expenses, such as travelling to a family wedding.
- Applying SG to the self-employed
Self-employed women have significantly lower superannuation balances than both female employees and the male self-employed. In the run-up to retirement, the average balance for self-employed women is around half that of female employees and the male self-employed.
The issue of the inadequate retirement savings of the self-employed is increasingly important with the rise of the gig economy and the changing nature of work.
- Applying SG to income replacement payments to address broken work patterns
SG should apply when income is replaced as a result of a workplace or legislative entitlement to receive a salary or wage, such as paid parental leave, salary continuance payments or worker’s compensation.
- Removing the $450 a month threshold for SG to help low income earners save
There is currently a threshold where SG doesn’t apply when a worker earns below $450 per month in a particular job. Ensuring all wages attract superannuation will help more low income earners save for their retirement and reflect the changing nature of work. ASFA estimates that around 365,000 individuals (220,000 of these women) would benefit from removal of the threshold, enabling higher retirement savings.
- Reform family law, conditions of release and the Anti-Discrimination Act to ensure that women’s superannuation is appropriately protected
There is a range of measures when women separate or divorce to protect women’s superannuation, however, refinements are needed as it can prove difficult for low income women in particular to enforce their rights under family law. Consideration could also be given to allowing women experiencing domestic violence to access some of their superannuation. In addition, changes to the Anti-Discrimination Act can be made to allow employers the flexibility to contribute more in superannuation for women.
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