The ABS has again produced data that shows women are lagging badly behind men in one of the pillars of our retirement income. This is because our highly subsidised superannuation system is based on pre-retirement earnings. Over their lifetime and because they take on particular types of jobs, women earn less than men. The reasons are complex but basically come down to the time spent in paid work versus unpaid care and the still unequal pay for many jobs identified as mainly female. Fair Work Australia acknowledges this in the ASU equal pay case but can’t really fix it.
Relativities may change slowly over time but signs are not good as the hourly pay rates gap is remarkably resilient at around 18%. Parenting time is still unequally divided and workplace cultures suggest long working hours will be not be shortened soon, even if it could increase productivity. So what is the appropriate way of ensuring that the many women (and men), who have limited their work time, have access to decent retirement income?
This question is back on the political agenda as unions rev up their campaign to ensure that the government uses some of their mining tax take to raise the superannuation guarantee to 12%. And the bastards are using the low rate of female lump sums as an argument for this change!
Most people fail to understand the way that the government supports the 9% contributions to superannuation. The reason that they need to use the mining tax to fund a higher levy is that the government offers very generous tax concessions to high income earners who contribute to super. The total concessions currently costs about $26 billion in income tax foregone, about the same as the age pension, and the bulk goes to those in the top two income brackets whose contributions are concessionally taxed at 15%.
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Currently those paying into super who are below the tax threshold of around $16,000 per annum are being overtaxed at 15% and those in the 15% tax bracket get no benefit. So raising their contributions to 12% will do nothing or very little to benefit them and may also eat into needed pay rises. They may get a new rebate that will leaves them about square but this will take little of the $8 billion it will cost to implement raising the levy to 12%. Most of the income foregone will again go in public subsidies for those in the top two tax brackets.
Imagine how much more income could be offered to the women who will retire with little or no serious savings, if that money was available for another type of payment. The ABS data shows that working age women have about half the retirement savings that men have. Obviously hours worked and time in the workforce is a big factor, but these often relate to the care of others. This raises the question of what is the public obligation to contribute to an adequate retirement income for those who have less time in paid work.
We have a pension system that does provide a basic income, and offers a frugal standard of living for those who have a paid off home or are in public housing. Others will battle if they are dependent on the pension alone. I would suggest the most equitable and efficient solution to the potential poverty of women (and others) with limited retirement income would be some supplementary pension payments. These could be appropriately targeted to those in need and wouldn’t waste public money subsidising high income earners’ tax avoidance strategies.
The government and union commitment to raising the levy deliberately exploits women’s needs. They both fail to mention that the Henry review actually recommended against bringing in this increase. Henry stated that raising the threshold would further decrease equity because:
- the extra contributions would effectively limit already low income and reduce living standards as rises would be traded against the levy;
- the current taxation concessions were grossly unfair to low income earners and should be replaced by taxing contributions at one’s marginal tax rates.
The ABS data show the intransigence of gaps between male and female contributions but does not show how the tax concessions assist the rich to save more. The government and finance industry argue about the benefits of the levy and the super funds’ role in the GFC. They never mention the rich use of the personal superannuation funds to avoid tax. These average $1 million in holdings versus the 15% of men and 7% who have more than $40,000 in their funds. Super is a rich man’s rort and the unions should stop using women’s plight as a cover for more money into super funds!
And it won’t reduce our pension bill either. Nearly five million people have only what their employer contributes, and official calculations show that few will save enough funds not to draw the pension. There is also an industry out there which helps organise ways of arranging money so many well off retirees pay no income tax, draw high super payments and still get the pension concessions.
Restructuring the public concessions that go to the rich would leave plenty of money for those whom we should subsidise. Too much of what we spend on super is a tax rort.