Sex and super: retirement income needs to be fairer
Australia’s compulsory superannuation system turns 21 this week. For nearly a century before it was introduced by the Keating government on July 1, 1992, the publicly funded aged pension had been the mainstay of Australia’s retirement income system. Eligibility for it depended on an individual’s age and means. But superannuation linked retirement income much more to how long a person worked. Super is now fundamental to Australia’s social and economic fabric. But it is increasingly clear the system is failing women. As the Herald reported on Wednesday, women have just 37 per cent of Australia’s combined superannuation savings and the superannuation industry estimates nine out of 10 women have insufficient super to support a comfortable standard of living in retirement.
There are many reasons for this. For a start, women tend to earn less than men even when they work the same number of hours. The average full-time male worker earns about 17 per cent more than the average full-time woman. A far more important factor is the tendency for Australian women to leave the workforce for long periods when they have a baby, depriving them of superannuation contributions. This has been dubbed the “super baby debt” – just two years out of the workforce can leave women $50,000 worse off than men in retirement.
It is up to each mother to decide when they return to work after the birth of a child. Those who choose to spend time caring for children should not be left with inadequate resources for their retirement.
The super baby debt is compounded by the tendency for mothers to work part time. Australia stands out internationally for the prevalence of part-time work. We have one of the highest rates of part-time employment among comparable member countries of the Organisation for Economic Co-operation and Development. And women hold nearly three-quarters of all those part-time jobs. Even though Australian women have greatly increased their involvement in paid work over several decades, they still tend to be secondary earners. Australia’s male breadwinner model has proved far more resilient than in some comparable countries, including the US.
The consequences of a generation of women with serious shortfalls in retirement savings are profound. But overcoming gender inequity in the super system will be difficult because some of the causes are deeply rooted in cultural norms.
Education is important. A recent report on attitudes to superannuation by Suncorp and the Association of Superannuation Funds of Australia identified a “gender gap in superannuation knowledge, engagement and attitudes”. Women need to be more aware of the long-term consequences of choosing to remain out of the workforce for long periods and of part-time work. The report suggested women recoup super by contributing an additional 1 per cent towards their superannuation contributions for every two years out of the workforce, for the rest of their working lives.
But government policy responses are also urgently needed to boost the retirement savings of women. It makes no sense, for example, that the government’s paid parental leave scheme, which pays primary carers for 18 weeks at the minimum wage, doesn’t include super. The Coalition’s more generous paid maternity scheme is likely to be all the more attractive to prospective mothers because it does provide for super to be paid during the leave period.
Consideration should also be given to the proposal by Sex Discrimination Commissioner Elizabeth Broderick for ”carers credits”. These could be used to bolster the super accounts of people who leave paid work to act as carers either for children or the elderly. Carer credit schemes already operate in several European countries including Britain and Germany. The government should take up Broderick’s suggestion that the Productivity Commission evaluate carer credits and recommend how they could be efficiently introduced in Australia.