Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697636020241.pdf (Australia)
Submission - Economic Security for Women in Retirement I am a Finance and Economics Consultant who has spent considerable time assisting women with superannuation and campaigning on the superannuation gender gap.

I welcome the opportunity to make a submission to the Senate Inquiry into Economic Security for Women in Retirement.
Structural impediments I have conducted seminars, discussion groups and webinars on superannuation and retirement planning for women in all the mainland states of Australia, reaching over 1,200 women.

From these forums I have identified two major structural impediments that impact on the ability of women to save for retirement: 1. a superannuation system that is based on income - the more you earn the more super your get.
The superannuation guarantee applies a proportion of income from paid work, so those on lower incomes receive lower nominal amounts.

The system benefits those in well paid continuous full time employment and disadvantages those on lower salaries with irregular work patterns including career breaks, part-time and casual work.

2. a tax system that provides the greatest superannuation tax concessions and incentives to those who need them the least.
The flat tax of 15% gives a far greater incentive to those in the higher tax brackets (over 37%) to contribute more to super.

According to the Financial System Inquiry, the majority of superannuation tax concessions accrue to the top 20% of of income earners.

Because many women have irregular work patterns and lower incomes, under Australia's compulsory superannuation guarantee system, they have accumulated considerably less superannuation than men.
Understandably, many women are disengaged from a system that is complex and does little to help them.

I gave my first presentation on the gender gap in superannuation in 2010 and since then there have been a plethora of reports and conferences analysing the causes of the gap, many suggestions about how to close it but virtually nothing in the way of changes to the system to benefit and motivate women.

In fact recent changes to the system have disadvantaged women even further.

In particular: 1.
In particular: 1.

Discontinuing the Low Income Superannuation Contribution (LISC) in 2017 will significantly affect women.

This government payment of up to $500 to the super funds of those earning less than $37,000 benefits over 3 million low income earners, of whom around 2 million are women.

Having funds placed in their super accounts helps to motivate Economic security for women in retirementSubmission 37 and engage women in saving for retirement.

2.
2.

Cuts in the Government co-contribution from $1,500 to $500.

Before the latest change, the co-contribution was a strong incentive to young women to build their super.

At one of my seminars, a young woman of only 19 years proudly announced that she had contributed $1,000 of her savings to her super and had received the same amount from the Government.

This encouraged her to take an active interest in her superannuation and see it grow further.
Sadly the current $500 co-contribution – requiring a $1,000 voluntary contribution – does little to motivate young women, who face other demands on their savings, including rising costs of housing and education.

3.

Cutting the concessional contribution cap several times for the over 50s from $100,000 in 2008 to the current $35,000.
In the past, the more generous caps enabled many older women in professional, skilled and management positions with low superannuation balances to catch up by using a transition to retirement strategy that allowed them to salary sacrifice and build their super in a tax effective manner.
As these caps include the compulsory employer contributions, the lower residual amount after the cuts significantly reduced the ability of these women to make the additional voluntary contributions which they often were more able to make later in life after they have educated their children and paid off their house.

On top of this, the many changes to the rules have discouraged women even further.

Measures to provide women with access to adequate and secure retirement outcomes 1.
Eligibility for Government incentives to build superannuation based on an age- related level of account balance rather than level of income.

The Government can assist women by basing eligibility for superannuation incentives on the level of account balance rather than the level of income.

As long as our superannuation system is income based, it will continue to discriminate against women.
I believe that the best way to close the gender gap is to move completely away from allocating superannuation concessions according to the level of income and shift to a system that allocates concessions according to the level of account balance.
Such a system would involve establishing benchmark account balances by calculating the amount that an employed person working full time on male average weekly earnings with no career breaks Economic security for women in retirementSubmission 37 in a balanced fund would have accumulated by age 35, 40, 45, 50 etc.

If a person's super is below that amount then allow additional concessional contributions until he/she has reached the benchmark level.
This would eliminate the need for contribution caps which can be complex to administer.

Superannuation balances would be calculated in accordance with current Centrelink reporting requirements for aged pension means testing.

An overall assets test could be applied to prevent people from switching out of super on reaching preservation age.
By moving away from concessions based on income from employment, people who are in caring roles could still contribute with funds from partner /spouse/parent or government carer payments.

The system would significantly benefit women who had previous breaks from the work force, had previously worked on a part time and/or casual basis or were previously in a low paid position but have since improved their earnings capability through further study or training.
Other incentives such as the co-contribution could also be limited to people with low levels of superannuation but still able to contribute, regardless of whether or not they are currently employed.

Tax concessions for high income earners would be reduced, providing the means to continue and perhaps increase the LISC which could become a low balance superannuation contribution to help those in caring/community roles and not in receipt of income.
By switching to a system based on the level of super balance rather than level of income, those most in need of assistance are helped – and while the majority of these would be women, men who have fallen behind in their superannuation would also benefit.

2.
2.

A structure that accommodates products and services from financial institutions and superannuation funds that relate to the needs of women; The low level of engagement of women in superannuation and retirement planning is also explained by a perception that the industry does not relate to them personally or to their differing needs.

Development of products and services to suit women would help to increase their engagement with super and hence their motivation to make voluntary contributions.
Some examples of products and services that could help women are: • Lifecycle or target date funds for women that allow for changes in asset allocation over time and their longer life span.

These funds allocate aggressively to risky asset classes when the investor is young and gradually switch to more conservative strategies on approaching Economic security for women in retirementSubmission 37 retirement.
Women generally have a more conservative approach to risk and might otherwise avoid growth oriented investments when young that help grow their super over the longer term.

• Combined or family superannuation accounts where superannuation contributions are shared between partners that may have significantly unequal account balances when one is taking on greater family responsibilities and hence has lower work force participation and income.
Participating in a combined account that is larger and growing could motivate more women to take an interest in their superannuation.

Splitting voluntary contributions between partners would be easier, particularly when one is temporarily out of the workforce, family members could share their superannuation more equitably and have lower fees from larger account balances.

Superannuation splitting agreements in divorce would also be facilitated.
Creation of such accounts would require fund trust deeds to be varied to redefine “member” and cover issues such as succession, exit strategies and rights of operation.

Another mechanism could be to develop joint Retirement Savings Accounts with suitable investment strategies for families.

In either case, such combined accounts could be enhanced with insurance products suitable for those with dependent children.
• Guaranteed and/or lifetime annuities that allow for the greater life expectancy of women and longer periods in the pension phase as single income households or aged care residents.

These products might interest those in self managed funds who wish to purchase annuities, particularly after the death of a partner.
As women are likely to have longer periods in the pension phase, products such as cost effective lifetime CPI indexed pensions rather than market linked products would help them in adapting from a dual to single income phase.

Gender analysis of pensions and annuities could provide some useful guidance for further development of these products to suit women.

3.

Enhanced female financial literacy to raise engagement in superannuation through workshops, seminars and programs targeted at women.
Financial literacy surveys and research in Australia consistently show that women are concerned about their long term financial future and have lower levels of awareness, motivation and understanding regarding superannuation than men.

They also have much less confidence in relation to superannuation, taxation and investment and planning for their long-term future.
However the Economic security for women in retirementSubmission 37 research shows that they are interested in learning more, particularly from information presented in a female friendly manner without industry jargon.

The research also shows that education targeting women should take account of attitudinal differences as well as structural factors and life stages.
Voluntary rather than mandatory contributions are more suited to the changing work patterns of women and to motivate them to contribute to superannuation, their level of awareness, trust and knowledge needs to be raised in a positive manner.

This can be achieved through customised workshops and seminars.

By supporting programs to raise female financial literacy, Government can help women to engage more with the system and seek products and services that suit their needs.
These programs would be better run by women's support organisations to build trust and confidence among women and to ensure that the information is independent of financial institutions.
Pauline Taylor Finance and Economics Consultant B.Comm(Melb) GDip Financial Planning GDip Applied Finance and Investment F.Fin Research sources: Financial Literacy Foundation 2008, Financial literacy: Women understanding money, Commonwealth of Australia Australian financial attitudes and behavior tracker Wave 1: March – August 2014 – Australian Securities and Investment Corporation Taxation and Superannuation Literacy in Australia – JASSA - The Finsia Journal of Applied Finance, ISSUE 1 2014 Women’s Financial Literacy Research Report –WIRE Women’s Information, August 2007 ANZ survey of adult financial literacy in Australia, May 2015 Economic security for women in retirementSubmission 37