Superannuation gap entrenches inequality for women workers
When women take time out of the paid workforce, change jobs or reduce their working hours for the sake of caregiving responsibilities, take home pay is the immediate price to pay. However, there’s a more insidious and hidden cost: superannuation and retirement savings.
After decades of legislative, industrial and social advancement, women and men are still not equal. A majority of Australian women face poverty in retirement, with little or no superannuation behind them.
The 2015 ANZ Women’s Report states that women retire, on average, with half the amount of superannuation as men and that 37 per cent of women have no personal income upon retirement.
A whopping 90 per cent of women retire without adequate savings to fund a comfortable retirement. One in five women yet to retire has no superannuation.
Women’s typical work patterns, primary caring responsibilities and existing pay inequities pose many problems for retirement savings.
Women tend to spend less time in the workforce, due to factors such as raising children, returning to work on a part-time basis and caring responsibilities for elderly parents or grandchildren. Less working time means fewer years to accumulate superannuation.
Many women retire when their (often older) husbands retire, thereby forgoing a further few years of income. Women live longer than men, with an average life expectancy of 87 years compared with 84 years for men, meaning that retirement income needs to be stretched over a longer period of time. This results in lower annual income levels.
- The facts:
- Women make up only 35 per cent of the full-time workforce, yet they make up the vast majority (70 per cent) of the part- time workforce.
- Women’s workforce participation rate is 59 per cent compared with 71 per cent for men.
- Women earn an average of 18.8 per cent less than men (as a comparison of weekly average full-time earnings).
- 84 per cent of Australian women with a child under two work part-time.
- Many women (49 per cent) experience discrimination during pregnancy, while on parental leave or upon their return to work.
- Australian women returning to work after 12 months of parental leave encounter an average seven per cent pay penalty, which climbs to 12 per cent in the subsequent year of work.
The SG is not enough for a comfortable retirement
What is abundantly clear is that the employer-funded Super Guarantee (SG) rate of 9.5 per cent superannuation is not enough.
A planned increase for the SG rate to reach 12 per cent by 2019 has been deferred by the federal government. The rate will now remain at 9.5 per cent until 30 June 2021 and then increase by 0.5 per cent each year until it reaches 12 per cent – further entrenching the challenges facing working women saving for their retirement.
Voluntary superannuation contributions remain an attractive way to save for a decent retirement income as these contributions are subject to concessional tax rates, which are much less than normal income tax rates. Those aged under 50 years can contribute up to $30,000 per year (the cap is $35,000 for those aged over 50 years) into their superannuation at the concessional tax rate of 15 per cent.
This means that you keep more of your money for use in retirement.
The age pension currently provides only about $34,252 per couple or $22,721 for singles – so an alternative source of income becomes essential for most people to maintain a desired standard of living.
Collective bargaining enhances retirement savings
Strength in collective bargaining has delivered the opportunity for enhanced financial security in retirement for many Queensland teachers and education workers.
In most Queensland schools, collective bargaining has already delivered enhanced employer contribution to superannuation, on the basis of an employee co-payment. Typically, an employer contribution of 12.75 per cent is payable where an employee chooses to make an additional personal contribution of five per cent to superannuation.
An employee’s voluntary superannuation co-payment may also be made before tax, in accordance with the salary packaging provisions in the relevant collective bargaining agreement. This provision currently applies in all Queensland state schools, as well as in Catholic, Anglican, Lutheran, PMSA and many single-site independent schools.
Enhanced employer contributions to employee superannuation results in a very substantial benefit for members’ retirement savings in the longer term.
What’s in store for the future?
While progress has been made through collective bargaining and further voluntary contributions allow workers to consciously plan for retirement, more needs to be done to address the chasm between women’s and men’s superannuation balances.
The Australian union movement is campaigning to have superannuation payments included in the national paid parental leave scheme and continues to fight for pay equity. An ongoing conversation about women and superannuation is essential to effecting change around this signifi cant issue.
Read more about Australian Unions’ campaigns at www.australianunions.org.au