Women’s superannuation

Mark Bouris recently wrote a column for the Age and Sydney Morning Herald about women and superannuation. It’s a very important topic and credit to Mark for opening a public conversation about it. The column outlined the problem (which is that women tend to retire with much less super than men) and said we needed a superannuation system that addressed this inequality but said nothing about what such a system might look like. In response to comments and questions via twitter from myself and others, Mark wrote another column proposing some solutions. Thanks again to Mark for taking this on as it’s a very challenging problem to solve. Below are my thoughts on the proposed solutions in his article. I’m not writing this to bring down Mark’s ideas, just to take part in the conversation and see if we can hone in on some implementable solutions.

The superannuation guarantee is about to start rising, to 12 per cent of wages by 2019. We could look at this being struck at 15 per cent of wages for women. The actuary firm Rice Warner now has an application before the Human Rights Commission to be allowed to pay 15 per cent super to female employees.

This would go a long way to bridging the gap but has two big problems. One is that women who do not pause their careers to have children could end up with more super than their male counterparts. The other problem is that employers may be more reluctant to hire women because of the extra costs. I can’t see this one flying politically because of these two problems. Perhaps if it was targetted to any individual who takes time out of work for child rearing and the duration of it was linked to the amount of time away from work it could have legs.

It’s critically important that measures like these apply to men who take time out from their careers because if they don’t then couples are under greater financial pressure to maintain current parent role stereotypes of men working and women staying at home. I’m not just saying this cos I’m a dad who stays home part-time…. honest.

Superannuation is taxed at contribution and on earnings. We could drop one of these taxes to allow new mums’ contributions to grow faster.

Perhaps this would be useful as part of a suite of measures but unless it’s applied for the lifetime of the super or for some considerable time after return to work then the impact would be minimal as there usually isn’t all that much super in an account when women have children. Also, the concessional taxation of super is already pretty generous and you can imagine this being just another vehicle for the wealthy for tax minimisation.

Maternity cover
Employers may have generous maternity leave schemes, however, the employees’ super is not added to while they’re on leave. Some employers are paying the full super guarantee while the female employee is on maternity leave.

This is a really good one and is definitely worth pursuing I think. The obvious question is “who pays?” because we don’t want to create a disincentive for employing women of child bearing age. Again, needs to be for both men and women who take parenting leave.

This goes some way to fixing the problem but doesn’t address one of the big causes of the gender divide which is that having children often coincides with really critical years for career development. Not only are parents who take time out missing out on super while they’re out of the workforce but they’re setting themselves back in terms of promotions, skill development and all that. These have flow on effects through to the super contributions for the rest of their lives.

Government matching
To encourage women to stash money into super while they’re working, the government could look at matching female voluntary contributions dollar for dollar. Make them tax free.

Like the first suggestion, if this is universally offered to women then those who would get the most out of it are those who do not interrupt their careers to raise children as they are likely to have the most disposable income to make voluntary contributions to super. For the same reason it would disproportionately assist higher income earning women whether they have children or not. It would need to be targetted carefully and possibly be means tested or something to make it equitable.

Spouse concession
While a mum is out of the workforce raising a family, her spouse should be allowed to make contributions to her account tax free.

This is another one where by far the greatest benefit would be for the wealthy who would use this as yet another tax minimisation strategy. Poorer families trying to get by on one income will not have meaningful amounts of money to contribute.

Advice rebate
Along with women’s lower lifetime contribution levels, there is a widespread lack of understanding and comfort with the superannuation system. All financial services providers know this and don’t know what to do about it. We could look at fully tax-deductible financial advice for women, or allow fund managers and adviser groups to provide ”free” advice and claim the deductions themselves. Either way, women who are confident and informed will be more engaged with super and will be more likely to make good decisions.

This one’s a no-brainer. It should be done in one form or another.

We have to start early, in our schools. Teaching the basics of investment and financial adequacy will empower young women with information.

I agree with this one too. Though just contemplating the bureaucratic hurdles required to implement it give me a headache.

I’m aware that all I’ve done here is critique the hard work of others without offering much myself so I will try to lend a little brain power to this issue over the next little while and write again with some more policy suggestions.

Thanks again Mark for raising this really important issue.

Mark Bouris’s article: http://www.smh.com.au/money/super-and-funds/strategies-to-fix-the-super-shortfall-20130427-2il2z.html#ixzz2RnelVQez

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