Closing the super gap
Industry leaders say it’s time the superannuation system was overhauled in order to create a more even playing field for women and low-income earners. And while, as individuals, there are simple adjustments you can make to help boost your super savings, changes are needed at government level for the most effective outcomes.
In the 25 years since compulsory superannuation was first introduced in Australia, the retirement savings of women and low-income earners have failed to keep pace with the rest of the population.
At present, women have almost half the amount of superannuation savings than men when going into retirement – not enough to live comfortably. With the rise in the gig economy, which is dominated by women and low-income earners who are often excluded from employer super guarantee payments, the future, without change, looks bleak.
Sandra Buckley, Executive Officer of advocacy group Women In Super, says that while the vast majority of people know they should be doing more when it comes to superannuation, many don’t know how or don’t have the financial means to do so.
"The onus shouldn’t be on women [or low-income workers] to fix the problem, especially when most don’t have the means to do so,” she says. “Rather government action is needed to make super fair."
- Provide women and other low-income earners with an additional $1000 government contribution annually into their super, boosting their balance and helping them make up the gap.
- Make sure there are no further delays in increasing the super guarantee from 9.5% to 12%.
- Measure and publish the super gap annually and assess the impact that any future legislation changes to super would have on women.
According to Industry Super Australia’s head of consumer advocacy, Sarah Saunders, the superannuation system should acknowledge the caring responsibilities that take largely women - and increasingly men - out of the paid labour force to impact on their super.
“Greater employer flexibility; more affordable and accessible childcare; and requiring super to be paid during parental leave in line with other types of leave, are logical steps,” she says.
And while business has a clear role, Saunders says that the onus should really be on government to ensure the system evolves to reflect the changing nature of work.
"Scrapping the $450 per month threshold at which employers are required to pay super would be a good start," she says.
Currently, an estimated 220,000 women fall under the threshold each year, denying them the superannuation their colleagues receive as an automatic right. Removing the threshold would ensure people with intermittent, casual or insecure employment are included in the super system.
While we wait to see how government responds, Women in Super has tips on the things can do people to help boost their retirement savings.
- Super is a long-term investment and retirement may seem a long way away but it pays to engage with your super fund and understand your current situation and your options.
- Consolidate all super accounts into one (ensuring first that there is no adverse impact to any insurance policy held within your current superannuation offering) to reduce multiple fees.
- Choose an all-profit-to-member fund so there is a focus on keeping fees low while maintaining performance for members.
- Check fees (administration/entry/exit and investment) and consider switching to a low-fee fund (fees can eat up super especially low balances).
- Check performance returns over the past five to 10 years and ensure that the appropriate risk strategy is chosen for your risk appetite and time horizon.
- Seek advice – most funds provide free advice for an initial consultation and, if not, go elsewhere. It is a service that should be provided to members.
- Take advantage of the magic of compound interest and start saving as soon as you can.
- If you can, take advantage of the tax concessions by salary sacrificing an additional amount every paycheck.
Websites such as ASIC’s Money Smart, which is a financial guidance website, Industry SuperFund’s reference material on women and super, and the ATO’s Super Calculator, also provide a wealth of information and advice on how to make the most of your superannuation.
Most importantly, remember, that it is never too late to start saving for retirement and no contribution amount is too small.
For more information on women and superannuation, click here.
This article was originally published by The Guardian on 13 March 2018. The original article can be viewed here.