Women are getting a raw deal in retirement. Can these changes fix it?

Women may live longer, but under Australia’s current system, we retire with a whole lot less.

It’s a struggle I’ve already seen the older women in my family live through. It’s a struggle that faces younger women as they take time off for their families. We all work hard. Wouldn’t it be nice if we got the same reward?

Right now, The Australian Senate is meeting to discuss the huge gap in superannuation between men and women – men retire on average with $198,000; women with $112,600 (ABS Survey of Income and Housing, 2009-10). Whether this talk translates into action, let alone meaningful change, is anyone’s guess.

Thankfully, somebody has decided to be more proactive and stand up for Australia’s women. AustralianSuper, one of the country’s biggest players in retirement, has given the Senate a powerful list of suggestions.

These changes could not only help women approaching retirement, but also assist hard-working Australians on a lower income get the super savings they deserve.

Do you think these suggestions make good sense?

1. 
Continue helping low income earners with small supplements

• On the current system, those working with lower incomes get a small but vital superannuation boost from the Government: up to $500 per year, automatically placed into their super.
• Sadly, this safety net (which benefits people earning $37,000 per year or less) will end in 2017.

AustralianSuper believes this payment – which they call the “single most important reform” to help women on lower incomes – absolutely needs to be kept in place.

2. 
Make sure we pay enough super to afford retirement

You can work hard. You can pay the required amount of super as you go. You can even continue contributing during time off work. But what if this still isn’t enough to comfortably retire?

According to AustralianSuper, this is the reality that faces Australian women. The current contribution amount required – 9.5 per cent – simply isn’t enough to fund the retirement we need.

While the current amount will eventually reach a more satisfactory 12 per cent, this is an agonisingly slow process. It isn’t scheduled to get there until 2025 –potentially too late for the next generation of retirees.

This needs to change now to make a meaningful difference.

3. Make sure employers contribute super – no matter what you earn

It should be a simple system: earn money, and your employer will pay superannuation into your fund.

But what if you’re working multiple jobs? What if none of them earns you over $450 a month? If so, none of your employers are obliged to make any super contribution.

AustralianSuper describes the current threshold as an “outdated policy”, denying superannuation to not only low-income earners, but also the growing number of casual and contract workers.

Australian women shouldn’t be punished for working low-income jobs, or having to combine income sources to make ends meet. If it’s income, it should count.

4. 
Keep the super contributions coming – even when you’re taking time off work

• If you have contributed super through your childbearing years, would you be better off today?
• Those of us who put work on hold – for children, for injury, for any reason at all – will usually stop making super contributions during this time. This means we’ll ultimately have to contribute more and retire later.

Wouldn’t it be great if the income replacement we got during this time – such as parental leave or workers’ compensation – also went toward securing a future? AustralianSuper has proposed that all such payments have a Superannuation Guarantee, just as a normal income stream would.

5. Reward those who make extra contributions to their super

We have a wonderful incentive to contribute more to our super funds (beyond that already contributed through your employer): a co-contribution scheme.

If you are a low- to medium-income earner, the Government makes a contribution to the individual’s super fund.

Sadly, support for this scheme has been dwindling in recent years. In the early stages of this scheme, the Government contribution would be an extra $1.50 super for every $1 you contributed – all the way up to $1,500 in support.

Now for a low to medium income earner ($50,454 per year or less), the maximum amount of support is $0.50c for each $1 up to a maximum of $500 – and it would require a personal contribution of $1000 to get even that. While certainly still helpful, this scheme could be doing so much more to help women.

AustralianSuper suggests an improved co-contribution scheme for low-income earners; potentially one aimed specifically at helping women.

Have you (or the women in your life) suffered from lower retirement savings? Do you feel like you got a fair go? Which of these incentives do you feel would help you the most?

This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788. The views expressed are those of Starts at Sixty and not necessarily Australian Super. For more information, please visit the AustralianSuper website.