Look carefully at who is pushing for the rise in super contributions to 12%. The clear beneficiaries will be the finance industry, union funds and high income males — but they’re using women as their stalking horse in a cynical argument for raising the level of compulsory contributions.

The rise is being falsely promoted by the superannuation industry as the remedy for women’s low retirement income savings. The campaign fails to point out men and the industry that will gain more than women from the changes, as The Sydney Morning Herald reported yesterday:

Rough deal for women highlighted in push for 12% super levy

TAKING seven years out of the workforce costs women an average of $70,000 in lost retirement savings, says the Australian Institute of Superannuation Trustees.

But if the government delivers on its promise to increase compulsory employer super contributions from 9 to 12 per cent, future retirees could pocket an extra $100,000.

The super industry is targeting the rough deal many women get from super as part of an online public campaign to gather support for the compulsory super rise. While it says all workers need higher super contributions, it is women who are particularly short-changed in retirement because they live longer and are more likely to have interrupted working lives.

The promoters also fail to mention that this rise, to be paid from the mining tax, will cost the taxpayer $8 billion per annum when fully implemented in 2019. This sum of money, were it directed to low income retirees, mainly women), could increase the minimum pension level to make for more retirement equity.

Women, as paid workers, do badly out of superannuation. After 20 years of compulsory superannuation, on average, women have much less in their superannuation funds than men.

Part of this deficit comes from less time in paid work than men because of unequal unpaid workloads, part from the types of jobs women do that are often paid less than similar male jobs and, finally, women at more senior levels earn less than equivalent men as they bargain less effectively. So any retirement income policy, based on lifetime earnings will mirror the gender biases in social mores and workplaces. These create societal inequalities that need to be balanced by payments, such as the pension, that recognise care and other contributions.

The inequity gets worse because government offers current tax concessions that are biased in favour of higher (mainly male) earners. The higher your pay, the more your tax levels are reduced on contributions and earnings. In short you avoid more tax and the richest 5% receive 37% of the concessions. This concession reduces general revenue by some billions to subsidise rich people’s welfare.

I am not alone in my concern about this issue, although I am particularly concerned at the cynical use of the gender needs. The following extracts and quotes show how serious policy analysts are concerned but because they lack an institutional base are likely to not be taken seriously. The results will be an expensive but very inequitable policy change that will make ageing both more expensive and unfair.

The costs are clearly described in David Ingles’ 2009 paper for the Australia Institute on expenditure and its beneficiaries and gender effects:

Superannuation tax concessions will cost the budget $24.6 billion in 2008–09 (Treasury 2009), rivalling the $26.7 billion annual cost of the age pension and constituting a fifth of income tax revenue ($130 billion per annum). (About 29B in 2010-11 EC).

1. What is the incidence of the concessions?

  • The paper demonstrates that the tax concessions flow overwhelmingly towards the well-off, with those earning less than $34,000 per annum receiving almost no assistance and those earning over $180,000 per annum receiving the most. Astonishingly, the top five percent of individuals account for 37 per cent of concessional contributions.
  • The current concessions provide almost no benefit to low- income earners, including women working part-time, but an executive earning $300,000 per annum with a million dollar retirement account can receive $37,000 of concessions, 2.5 times the value of the age pension, for every year of their working life.

He later clearly states:

“Tax concessions for superannuation provide substantially greater benefits for men than women and this disparity will continue under current arrangements.”

The Henry Review actually recommended against raising compulsory 9% to 12% super as the extra was not needed by those on higher incomes and would disadvantage low income earners. The review also suggested that contributions be taxed as income, that is at the recipients’ current tax rate to both create better equity and net additional government tax income by reducing use of this form of tax avoidance, and provide extra income for equity needs.

Brian Toohey has written on this issue, including the following critique of the mining tax last year on Inside Story:

“Over time, the biggest chunk of the $9 billion will be taken by the cost to revenue of government’s decision to boost retirement incomes by increasing compulsory superannuation contributions to 12 per cent of salaries. This was not one of Henry’s recommendations — he reported that the existing level of 9 per cent is enough to provide a comfortable retirement once the system is mature. Indeed, Treasury modelling shows that the 9 per cent, supplemented by the age pension, will give low-income earners a higher disposable income in retirement than they get while working.”

Ben Spies Butcher, from the Centre for Policy Development, in a piece for Crikey stated:

“Super tax subsidies are grossly inequitable. Someone on the top tax rate gets on average more than $11,000 a year, while someone on the minimum wages gets nothing. It is also grossly inefficient. For every dollar we spend on super concessions, the government only saves 10 cents on future pension payments (i.e. it essentially loses 90% of the cost). We could simply spend this money on the services older people need, rather than subsidising (high income) savings and then clawing it back (from most old people).”

Yet there are few out these who will try and counter the push from the powerful axis of unions and finance industry heavies. The opposition is opposed to the rise in super for the wrong reasons, but this means the proposal could be caught in the Senate. As stopping this change could be an important contribution to equity for the aged, perhaps the Greens ought to oppose this proposed misuse of the mining tax alongside the cut in large company tax.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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