Aussie Women Face Deep Economic Insecurity in Retirement
Without Reform, Australian Women Face Deep Economic Insecurity in Retirement - 39% of Singles Currently Retiring in Poverty, this according to Industry Super Australia, an umbrella organisation for the industry super movement.
Industry Super Australia has told a Senate Inquiry that Australian women will continue to experience deep economic insecurity in retirement for decades to come unless the government makes changes to superannuation and pension settings a priority, especially tax concessions on super.
“Our daughters start their working life as well-educated as our sons, but the retirement system is weighted against them. Current settings do not deliver retirement security for most women and provide twice the level of government support to men as women in the form of tax concessions,” said Robbie Campo, Deputy Director of Industry Super Australia.
“These settings magnify rather than moderate gender differences in lifetime earnings. For example, the persistent gender pay gap, currently at 18%, blows out to a far worse gap in super savings of 44%. We can’t afford a system that fails half the population so badly.”
ISA has produced a comprehensive statistical snapshot of the structural bias in our retirement system in its submission to the Senate Inquiry into Economic Security for Women in Retirement. It tells a disturbing story:
- Women retire with 44% or $142,000 less super than men. ISA projections show that this gap will not significantly improve on current settings
- $30 billion a year in super tax concessions flow disproportionately to men who receive 67% of super tax breaks and women just 33% (see graph below)
- 70% of single, retired women rely on the full age pension
- 39% of single, retired women live in poverty - declining rates of home ownership will push this higher
- Women cannot rely on a partner for financial security - a third of women are not in a relationship by retirement age, while 40% of couples have insufficient savings to retire comfortably
“Years of unpaid, lower paid and part-time work mean women miss out on tax concessions and the magic ingredient of superannuation - the steady compounding of contributions and returns. Rather than accumulating wealth, women are accumulating poverty, retiring with just over half the super of men, on average, if they’re lucky,” said Ms Campo.
“One of the key impediments to women achieving better security in retirement is the structure of super tax concessions. At the moment, the more you earn, the bigger the hand out.
“For instance, single men in the top 1% of income earners gain the most from the system, benefitting from an estimated $2.8 million in tax concessions over their working lifetime. This supercharges their retirement income, even though they don’t need financial help to reach a comfortable standard. It makes no sense.
“We welcome indications that the government is considering a more equitable distribution of tax concessions. ISA recommends concessions be restructured to ensure a fairer proportion of the government’s annual $30 billion outlay boosts the super of low to middle income earners, who are predominantly women.
ISA’s submission also recommends a package of other systemic reforms to improve the outlook for millions of Australian women and modernise a system skewed to male working patterns and the notion of male breadwinner and provider.
- In the absence of rebalanced tax concessions, restore the Low Income Super Contribution which has boosted the super of nearly 50% of working women (but is due to be abolished in 2017)
- Pay the super guarantee on parental leave
- Provide a “super seed” for younger, low income earners to kick start the effect of compound interest
- In recognition of the importance of the age pension for women's economic security in retirement, moderate recent changes to the pension means test which undermines other policy reforms to improve retirement outcomes for low to middle income earners, including most working women.
“Importantly, if we don’t move now we will condemn future generations of women to a substandard existence in the latter part of their lives. In a country as rich as Australia, this would be a disgrace. Our daughters and their daughters deserve better,” said Ms Campo.
ISA’s full submission to the Senate Inquiry into Economic Security for Women In Retirement can be found here