Superannuation: time to redress the gender imbalance
Provision for retirement is an issue that affects all of us, but on balance the female half of the population has more to worry about than the other.
Women typically receive superannuation payouts around half those of men. Latest government figures show the median balance for men at, or approaching retirement age was $183,000, and for women $119,000.
This imbalance is for long-standing and well-documented reasons: less continuity in their careers and fewer hours worked; often less pay for equal work; and not getting the promotions that men are more likely to obtain.
More time out of the workforce results in loss of skills and decreased ability to regain a job with the same pay. Both historic and current evidence shows that women continue to bear the greater burden of parental care, and indeed carer responsibilities more generally, including looking after elderly parents. All these factors results in lower fund balances for women.
So what can be done? In our submission to the government’s retirement review, we make a series of recommendations that we believe could help redress the balance. Some of these build on proposals KPMG has made in a series of papers over the past two years on the inequalities in the workforce, tax and transfer systems negatively impacting on women – many of these reduce, or do not incentivise, women’s participation in the workforce.
If we could draw up the retirement system with a blank sheet of paper, no doubt we would include provisions that redress the unequal contribution that women make to society through caring for other generations. But sadly the current system does the opposite – while it was not designed to discriminate against women, in effect all it does is exacerbate the inequality. Specifically, through superannuation concessions, it amplifies the imbalance in earnings between men and women.
To start the process of getting more equality of outcome into the system we suggest changes affecting the three pillars of Australia’s retirement income system – they are targeted at reducing the impact on the Age pension (Pillar 1) by implementing amendments to increase/incentivise an increase to contributions (Super Guarantee Pillar 2) and the voluntary superannuation (Pillar 3).
- Removing the $450 per month wage threshold for entitlement to employer superannuation contributions: this would assist low‑income earners in saving more consistently for their retirement. It would also eliminate any temptation for employers to manipulate workers’ hours so as to keep their pay below that threshold.
- Requiring the Superannuation Guarantee to be paid on Commonwealth Paid Parental Leave and also applying it to workers’ compensation payments. Including superannuation contributions in the Commonwealth paid parental scheme would mitigate the current situation where primary care givers on Commonwealth parental leave — mainly women — cease receiving contributions to their superannuation accounts.
- Changing the Commonwealth’s contributions to top-up payments, rather than co-contributions, into the superannuation accounts of primary carers who have a child of pre-school age. Women would make up the greater part of this cohort. Given the huge potential long‑term benefits of even a small boost to a mother’s superannuation balance, KPMG believes that the impacts of a $500, $1,000 and $2,000 annual top‑up should be modelled by the Parliamentary Budget Office to enable the potential cost of this proposal to be estimated.
- Providing super contributions for those 50 to 59 receiving Commonwealth Rent Assistance – these Individuals (largely women) would also benefit considerably from having their superannuation savings topped up directly, as they would have limited ability to supplement their own mandatory superannuation contributions. This might ultimately save the Commonwealth money over the longer run if the superannuation fund performs well, and would deliver additional personal wellbeing benefits compared to greater reliance on the age pension
- Amending the Sex Discrimination Act to ensure employers who pay additional amounts to those who have taken on additional burdens of primary care are not in breach of the Act. If an employer paid a higher amount of superannuation contributions for those that had taken on primary carer responsibilities then the incidence of such a policy would substantially benefit women.
- Amending the concession caps for primary care and care-based work-breaks and replace the current contribution cap system with lifetime concessional contribution caps. This would benefit Australians with breaks in their workforce participation and/or periods of part-time working – typically women. This would enable individuals who had taken time out of the workforce to undertake carer roles to “catch up” over a period of time as their ability to make additional contributions increased.
To reiterate KPMG’s previous reports on gender inequality, much can be done to increase equality in workforce participation rates earlier on in the process. Our economists estimated that a halving of the gap between male and female participation would see the country’s GDP would benefit by $60bn over 20 years, while cumulative living standards would be raised by up to $140bn.
That must be the real goal of Australia as a country. But from a retirement perspective, we believe the proposals outlined here would do much to combat the inequality women face in later life.