Raising the Superannuation Guarantee rate to 12% is key to improving the retirements of women, despite concerns it could widen the super gender gap, says the Australian Institute of Superannuation Trustees.
A debate around raising the Superannuation Guarantee rate is ongoing, driven in part by a report from the Grattan Institute calling for the rate to stay at 9.5% as people have enough saved for retirement.
Treasury documents, recently released under Freedom of Information, show that increasing the SG rate is expected to widen the super gender gap – while women will receive higher super contributions, men will receive more due to the gender pay gap.
Australian Institute of Superannuation Trustees (AIST) CEO Eva Scheerlinck said increasing the SG rate was still necessary to address challenges women face around paid work and career breaks.
“Currently, an estimated 40 per cent of single women are retiring in poverty and older women are the fastest growing cohort of homeless people,” Scheerlinck said.
“Leaving super at 9.5 per cent will simply condemn more women to financial hardship in retirement at a time when many do not have safety net of home ownership relied upon by previous generations.”
Scheerlinck said the super gender gap needs to be addressed in other ways.
“Disappointingly, the government has not made any recommendations to reduce the gender gap. It has identified the problems – such as the gender wage gap and the impact of career breaks on women – but it hasn’t provided any solutions. Instead, we have Liberal backbenchers and the Grattan Institute proposing to take away the one solution that will make a difference to women.”
“Any move to renege the legislated increase SG to 12% is not going to help millions of Australian women retire with dignity.”
AIST is calling for the removal of the monthly $450 pay threshold in order to receive Super Guarantee contributions (which is calculated per-employer), paying superannuation on paid parental leave, and giving women and low-income earners an additional $1,000 government super contribution each year.
Working families to lose $240,000 from lower SG rate
Industry Super Australia (ISA) estimated that working families could lose almost $240,000 in retirement savings if the Super Guarantee rate stays at 9.5%.
“Some Federal backbenchers want the Government to cut the promised increased in super contributions, breaking a key election promise and denying local families the retirement savings they are entitled to,” said ISA.
Several Coalition backbenchers have been agitating for a pause or freeze to increases in the SG rate, claiming it will lead to increased wages. Though Treasurer Josh Frydenberg has committed to the legislated increases to 12%. However, he is also, reportedly, working on terms of reference for a review of retirement incomes – a recommendation of the Productivity Commission, which said the review should be completed before any increase to the SG rate.
ISA estimates that if the SG rate remained at 9.5, then this would cost a 30 year old man earning $85,000 a year $147,000 in retirement savings, and cost a 30 year old woman on the same salary – who takes time out from the workforce to have children – $93,000, or $240,000 between them.
“Australians should ask their local MP whether they stand by their promise to increase super contributions, or if they are happy to break their promise and deny families the extra money they are entitled to,” said ISA Chief Executive Bernie Dean.
“Cutting the super increase will cost families around the country hundreds of thousands of dollars in retirement savings. Australians will be left struggling to make ends meet in retirement, or will be forced to work until they drop before they can retire.”
“If the Government breaks its promise on super everyone loses. The Morrison Government needs to reassure Australians that their retirement savings aren’t at risk.”