written by Robert Deutsch CTA *
The average superannuation balance of a woman at retirement is estimated to be around a surprisingly low amount of $80,000. This is about half that applicable to a man who, on average, has a balance in the region of $160,000 to $180,000.
The gap is driven by a number of factors which include, in particular:
- the lower workforce participation rate of women as compared to men
- a disproportionate representation of women in part-time and casual employment
- the gender pay gap itself
- interrupted working lives due to, among other matters, having children
- the disproportionate amount of unpaid caring work undertaken by women.
The problem is most acute for single women who are way behind the superannuation required for a decent retirement and who are currently in their early 50s with no realistic prospect of improving their superannuation balance in the near term. For these women, the prospect in the near future for a reasonable retirement looks bleak indeed.
To add insult to injury, the age at which such women will be able to access the age pension is being increased from around 65 to 67 years of age. The consequence is that a woman now aged 60 without work will need to rely on the Newstart Allowance until she reaches the age of 67, when she may be entitled to the aged pension.
While men can be similarly disadvantaged, the figures suggest that, as a broad cohort, women will be in an infinitely worse position.
To address this problem, The Tax Institute would be broadly supportive of a suite of measures whereby the federal government would:
- make a co-contribution of $1,000 provided for all single women on a matched 2:1 basis where total assets held in superannuation in the name of the woman is less than $100,000
- provide an opportunity to make catch-up concessional contributions for single women who have had interrupted work practices
- make modest changes to the anti-discrimination laws to give a clear legal basis to schemes introduced by companies to provide higher superannuation payments in respect of female employees
- provide for the age pension to be made available to single women who have total superannuation of less than $100,000 from the age of 60
- provide a $1,000 per year contribution to be made to superannuation for an unpaid voluntary female carer. Clearly, there is also an argument to extend this to all carers, whether the carer be male or female, but that is a debate for another day.
It is worth noting that the government has already indicated that it will provide an opportunity for women to make catch-up concessional contributions where they have had interrupted work practices. Furthermore, some broad concessions have been made in relation to unpaid voluntary carers.(1) While a step in the right direction, these measures do not go far enough — the suggestions made above go a little further.
Two companies, namely ANZ and Rice Warner, have created schemes that are specifically targeted to benefit women. ANZ has a scheme whereby female staff can be superannuated by the employer to the tune of an extra $500 per year in superannuation contributions. That is a step in the right direction but, clearly, more needs to be done.
In relation to the age pension, it would also be worth considering the possibility of making the means test for age pension qualification more generous for single women who will invariably have a broader and perhaps longer reliance on the pension.
None of these ideas would come cheap.
Collectively, they would do some good in improving the lives of women and, most importantly, single women with low superannuation balances who have lost all hope of securing a decent retirement for themselves. The nature of the problem for this cohort is acute and should be addressed as a matter of urgency.
The issue, and finding appropriate solutions, require work and cannot be achieved overnight. All the more reason to act now with some bold small steps forward with more to come down the track.
1 Commonwealth of Australia, Budget 2017-18, Budget paper no 2, 9 May 2017.
* Robert Deutsch is The Tax Institute's Senior Tax Counsel. This article was first published in the August 2017 issue of the Institute's member-only journal, Taxation in Australia.