I guess my column struck a nerve last week.
I made the point that superannuation favours men over women. Not because of sexism but because our lives are different: women spend more time out of the full-time workforce because they have children, they raise them and they’re often the ones who respond to family emergencies such as serious illness.
This means women’s average super balances end up being a little more than half of their male counterparts. Their retirement savings, on average, are inadequate to fund a comfortable retirement, yet women retiring at 65 today can easily live into their nineties.
The response to last week’s column was huge and I received personal messages from many of you through Twitter and on our Facebook page. Many people noted that I identified the problem but didn’t offer a solution. So here are a few suggestions to think about:
- Contributions: the superannuation guarantee is about to start rising, to 12% of wages by 2019. We could look at this being struck at 15% of wages for women. The actuary firm Rice Warner, currently has an application before the Human Rights Commission to be allowed to pay 15% superannuation to female employees.
- Taxes: superannuation is taxed at contribution and on earnings. We could drop one of these taxes to allow new mum’s contributions to grow faster.
- Maternity cover: employers may have generous maternity leave schemes, however the employee’s super is not contributed while they’re on leave. Some employers are paying the full SG while the female employee is on maternity leave.
- 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.
- 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.
- 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.
- Education: we have to start early, in our schools. Teaching the basics of investment and financial adequacy will empower young women with information.
Finally, the purpose of superannuation was to create an actuarial income in retirement: to have a lump sum large enough that you can live off the interest.
Half of our population is going to struggle to achieve this, and it saddens me to see so many women feeling guilty and embarrassed about their lack of retirement savings, when they should be engaging and forming a strategy.
So I’d like to end by saying to my female readers that you are not to blame.
This is a problem of the system, not of gender.