Labor’s pre-election commitments to narrow the gender super gap, such as paying superannuation on parental leave and scrapping the minimum $450 threshold, are a welcome start, says Industry Super Australia.
The super gap appears at around age 35 when women have children, and steadily widens to around 40 per cent at retirement. And while the pay gap has narrowed to 14.6 per cent in 2018 (from a high of 18.5 per cent in 2014), it is but one factor in reducing the super gap.
Industry Super head of consumer advocacy, Sarah Saunders, says the mix of policies announced by the federal Opposition today acknowledge this reality.
“The system is unforgiving of broken work patterns, and yet women still provide the lion’s share of care,” says Saunders.
“Once women return to the workforce, catching up on super contributions and lost compound earnings is very difficult”.
“Policy-makers must show bi-partisanship in ensuring the superannuation system is fit for purpose and fair for everyone, and this is a positive start”.
“Adding super to paid parental leave, and phasing out the $450 monthly threshold are changes that respond to both existing realities and the evolving workforce”.
“Removing the threshold would ensure that everyone over age 18 who earns a wage, even across multiple job holdings, can build their retirement savings,” she said.
Industry Super says other policies worth considering include: a tightly-targeted capital top-up for low balance accounts; and aligning the Low Income Superannuation Tax Offset with scheduled (2021) SG rate and second tax threshold increases.
The Labor package includes:
· Super on government Paid Parental Leave and Dad and Partner Pay payments from 1 July 2020;
· Phasing out the $450 per month income SG eligibility threshold from 1 July 2020-1 July 2024;
· Amending the Sex Discrimination Act 1984 to ensure businesses can make higher super payments for female employees when they wish to;
· An annual women’s budget statement for greater transparency and policy impacts understanding;
·Consideration and reporting by Labor’s Council of Superannuation Custodians on the impact on women of future superannuation changes that it recommends to the government.
In 2015-16 the average super balance at age 60-64 was $270,710 for men and only $157,050 for women. ISA modelling suggests with super added to paid parental leave and the removal of the $450 threshold, a woman on a median wage ($46,000) having three children below age 35 could retire with 6 per cent or $30,650 more in super in real terms.
Industry Super Australia provides policy, research and advocacy on behalf of 16 not-for-profit Industry SuperFunds who are the custodians of the retirement savings of six million people.