Finance Your Super Submissions to retirement income review expose super’s women problem

Submissions to retirement income review expose super’s women problem

KPMG says our current superannuation system discriminates against women. Photo: Getty
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The government must pay superannuation contributions to mainly female disadvantaged groups to improve equity in retirement incomes, business consultancy KPMG believes.

Although it normally focuses on the tax needs of its big-business clientele, its submission to the government’s Retirement Income Review (RIR) has instead pushed for the government to provide super contributions to carers and renters.

“We have a superannuation system where there are significant disparities,” said Grant Wardell-Johnson, KPMG partner and author of its submission to the RIR.

Women are the victims of these disparities in ways so egregious that KPMG observed “Australia discriminates against the majority of its population – women”.

“To boost the positions of women we would say the $450 monthly earnings threshold, which is effectively gender based, should be scrapped,” Mr Wardell-Johnson said.

That threshold means a lot of part-time workers, especially women, miss out on superannuation contributions, making it virtually impossible to build reasonable retirement balances.

KPMG recommendations

“Our submission makes recommendations for changes to improve the retirement outcomes for women, noting that these would also impact men in similar situations. Overall, women, are disadvantaged by:

  • Less continuity in workplaces
  • Less hours worked
  • Less pay for equal work and
  • Not getting the promotions that men obtain.

“Further, focusing on parental care/carer responsibilities – we assert that a fair society would be one which has a relatively equal allocation of parental care responsibilities, and greater access to affordable childcare and preschool,” KPMG recommended.

“We say the government should provide super contributions for people on paid parental leave and provide top-up super for primary carers without demanding co-contributions,” Mr Wardell-Johnson said.

In another unexpected recommendation, KPMG called for the government to make super contributions for “those 50 to 59 receiving Commonwealth Rent Assistance”.

That would help boost retirement balances for people earning little before retirement and who are locked out of home ownership.

“Those people often feel very insecure,” Mr Wardell-Thomson said, adding the measures could be extended until retirement.

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Another measure that would support women’s super would be replacing annual concession caps on contributions for primary carers and people making care-based work breaks with a lifetime cap.

That would allow women who take time out of the workforce to care for children and parents to maximise any super contributions they are owed during such breaks.

Meanwhile, a submission from the Association of Superannuation Funds of Australia (ASFA) showed the legislated move of the superannuation guarantee from 9.5 per cent to 12 per cent of wages by 2025 would still leave Australia at the lower end of the scale of such payments.

As the chart below shows, the majority of OECD countries pay more than 15 per cent of wages in pension contributions.

ASFA found the Australian retirement system as it currently stands is sustainable.

The combination of age pension payments and the cost to the public purse of superannuation tax concessions should not be above 6 per cent of GDP.

The above chart shows that by 2055 the total spend on retirement incomes will be just over 5 per cent of GDP, despite our ageing population, the scheduled increase in the superannuation guarantee (SG), and the likely growth in voluntary superannuation savings.

Source: ASFA

The maturation of the super system and expected SG growth will quickly push up the level of retirement incomes for working Australians.

The above chart demonstrates that not only will incomes rise, the size of average pension payments will decline as superannuation increasingly bears the weight of funding retirements.

“ASFA considers that by 2050 at least 50 per cent of retirees should be able to have a comfortable standard of living in retirement – consistent with ASFA Comfortable Retirement Standard level,” ASFA’s submission said.

“Achieving this milestone is contingent on the SG rate increasing to 12 per cent as legislated.”

ASFA’s comfortable retirement standard is $43,787 per year for a single person and $61,786 per year for a couple who are home owners.

The New Daily is owned by Industry Super Holdings

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