A Fair Superannuation System

The current superannuation system, which is based on lifetime earnings, provides much greater tax benefits to those with the capacity to contribute more during their working life and high balances to support tax free pensions in retirement. Since 2007 the system of contributions caps, combined with tax concessions and exemptions to superannuation funds and tax free income streams, has allowed wealthy Australians to obtain tax savings through superannuation contributions.

Although the policy is to alleviate financial pressure by encouraging retirement savings to supplement the Age Pension, the tax concessions are skewed heavily towards the wealthy who are not likely to be eligible for the Age Pension, and would invest in alternative retirement savings strategies if the superannuation concessions were not available.

Accordingly the tax concessions need to be rebalanced to provide support to low and middle income Australians saving for retirement.

The data show that women’s superannuation balances are consistently lower than men in the same age group. In 2011-12 the average superannuation balance for women aged 60 to 64 was $104,734 compared to $197,054 for men in the same age group, a superannuation gap of 46.9%1 . Further data based on the HILDA survey shows that among individuals aged 60 to 64, women hold 32.3% of superannuation accounts with balances in the top 10%, compared to 59.6% of balances in the lowest 50%. 2 ASFA analysis shows that although the superannuation gap has narrowed since the introduction of the superannuation guarantee, since 2009 the gap has not narrowed further.3

As discussed in the NFAW submission to the Senate Committee Inquiry into Women’s Economic Security in Retirement last year, women are disadvantaged by the design of the superannuation system. Specifically, lower workforce participation rates mean that women do not earn as much over their working life and this is reflected in their lower superannuation balances at retirement.

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