Anglicare Australia partner, HESTA, tendered a submission to the Senate Inquiry into the economic security of women in retirement. The information below has been sourced from that submission.
The Australian Human Rights Commission reports that single elderly female households are at the greatest risk of poverty and experience the highest levels of persistent poverty.
Recently, a cross-party motion by Senators Jenny McAllister (Labor), Sean Edwards (Liberal) and Larissa Waters (Greens) was supported by the Senate, meaning that the Senate Economics References Committee will investigate, among other issues, a 46.6% gap in superannuation at retirement between men and women.
Australia has a sophisticated retirement system, but it is designed to reward those with unbroken careers. Women typically move in and out of the workforce, face wage discrimination and live around five years longer than men, leaving a stark gender gap in retirement incomes.
In Australia, women are financially penalised for taking on unpaid caring responsibilities.
HESTA, the superannuation fund dedicated to the health and community services sector, strongly supports the need for investigation in this issue. Investigation that goes beyond individual actions that women can take to improve their retirement outcomes and looks instead on the structure of the retirement system and if it is providing a fair playing field.
HESTA is an industry superannuation fund with more than 800,000 members, and over 80% of these members are women. They manage just over $32 billion of retirement savings.
The typical HESTA member is well known to Australia. She is skilled, vocationally driven and will spend time out of the paid workforce to care for others. She is currently 43 years old and has around $16,000 in her super account. In their submission, HESTA outlines the drivers of inequity in the typical member’s life and how this accumulates to negatively impact her retirement savings. The HESTA submission to the enquiry notes:
Because of our traditional industry base our members are:
1. More likely to live for five years longer than an average Australian male.
2. More likely to suffer the inconsistencies and discrimination of the gender pay gap.
3. More likely to take time out of the workforce on periods of unpaid leave.
4. More likely to be at risk of poverty in retirement.
Our mission is to make a real difference in the retirement outcome of every member. Creating a more equitable superannuation system will make a real difference to HESTA members. We regard this as unfinished business that deserves a policy focus for completion.
The HESTA submission uses a typical member’s working pattern to model what career breaks will mean to an overall retirement balance. Other drivers are acknowledged but, the case is made that time out of the workforce to raise children and care for others must be valued if the retirement system is to be considered fair.
HESTA also looks at the impact of the impending removal of the Low Income Superannuation Contribution (LISC) on the retirement outcome of women. This measure was put in place to ensure that low income earners are not unduly penalised for using the superannuation system through the taxation rules. It is proposed that this will be removed in 2017 and HESTA says that the LISC is fundamental to an equitable system for low income earners, most of whom are women. The HESTA submission notes:
The LISC provides some structural equity to 3.6 million Australians including over 2 million women. If removed as scheduled in 2017, those earning less than $37,000 on marginal tax rates of 15% or less would miss out on rebates up to $500 in their super accounts.
Losing this fairness rebate would leave around 1 in 3 Australian workers worse off, with disproportionate impacts felt in regional and rural communities, and on women everywhere.
We estimated in the 2012-13 financial year, this would unfairly impact more than 280,000 HESTA members, who would have seen their retirement savings reduced by up to $27,000 if the rebate was removed.
The third focus of the HESTA submission is on an administration “tradition” known as the $450 threshold. This is the amount of wages under which the employer does not need to pay superannuation. HESTA argues that this is a threshold that no longer needs to exist as electronic payment methods used mean there is no undue burden on employers that correlates to the amount the employee is earning. It is not known how many women this will impact but the potential recipients include those who could be working across a number of employers as discussed in the HESTA submission:
Consider our nurse, on returning to work she decides to take irregular shifts across three health providers. She earns the following in one month:
• $360 from a pathology lab where she works drawing blood samples
• $420 from a hospital filling in a night duty shift
• $445 from a GP clinic where she taught first aid.
Her total gross monthly pay is $1,225. Her total superannuation contribution for that month is $0.
Three different employers, all under the $450 threshold for the month therefore none of these made a contribution to her superannuation.
HESTA recommends the following changes to the structure of the superannuation system to promote fairness for women –
1. Commitment to keep the Low Income Superannuation Contribution measure
2. Removal of the $450 threshold
3. Valuing the unpaid caring roles at the time they are performed.
Submissions to the enquiry have now closed and hearings are taking place across the country.
Issued by H.E.S.T. Australia Ltd ABN 66 006 818 695 AFSL 235249, the Trustee of Health Employees Superannuation Trust Australia (HESTA) ABN 64 971 749 321. This is information only and is not intended to be taken as financial, legal or any other advice, and should not be relied on as such. The information is taken from sources considered reliable. While every attempt has been made to ensure the accuracy and reliability of the information, it is not guaranteed in any way. Forecasted information is based on assumptions considered to be reasonable (see Model Assumptions), and is provided for illustrative purposes only. Before making a decision about HESTA products you should read the relevant Product Disclosure Statement (call 1800 813 327 or visit hesta.com.au for a copy), and consider any relevant risks (hesta.com.au/understandingrisk).