The Grattan Institute has suggested that increasing superannuation tax breaks could actually worsen gender equality in retirement and has instead proposed changes to the Pension system as a possible solution.
Grattan Institute fellow Brendan Coates explained that Australia’s superannuation system is failing Australia’s poorest, who are “disproportionately women” and explained why the push to increase the caps on pre-tax super contributions would make the situation worse.
“Women save less via superannuation because they earn less. The current generous annual caps on pre-tax contributions are predominantly used by older, high-income men to reduce their tax bills,” Mr Coates said.
The Grattan Institute’s research paper proposes two reforms that together could help close the gender gap in retirement incomes and provide a boost to the savings of Australia’s most vulnerable women.
Pension increase
A targeted boost to the Age Pension for retirees who do not own their own home, delivered as higher Commonwealth Rent Assistance, would do the most to alleviate poverty in retirement.
Single women who are retired and do not own their own home are the group most likely to rely almost solely on the Age Pension, and are at the greatest risk of poverty in retirement.
This proposal is affordable: a targeted $500-a-year boost to Rent Assistance for Age Pensioners would cost just $250 million a year.
Better targeted tax breaks
Better targeting super tax breaks to the purposes of superannuation would reduce the gender gap in superannuation savings.
Super tax breaks provide the greatest boost to high-income earners, who don’t need them. Most of these high-income earners are men.
Better targeting of super tax breaks could free-up revenue to provide more targeted support for retirement incomes for people who need it most, and to reduce marginal effective tax rates for low- and middle-income earners to encourage greater female workforce participation.
Industry response
The Association of Superannuation Funds of Australia (ASFA) attacked the Grattan Institute’s research, calling the proposals “Victorian era”.
ASFA Chief Executive Dr Martin Fahy said the Institute’s paper, canvassing the best way to close the gap, adopted a fatalistic view of the future earnings of women and low paid workers and condemned them from an early age to poverty in retirement.
“This is simply Grattan having another go at super, urging abandonment of legislated increases in the Superannuation Guarantee (SG) and ignoring the reality that lifting SG and in fact, doing it faster, is the real solution to improving women’s retirements,” he said.
“This paper adopts a set-and-forget view of class and income inequality. Proposals to fix the Budget by substantially cutting back on super entitlements and then giving a relatively few older, low income, retired women in rental accommodation less than $10 a week, are insulting and demeaning.
“Instead, we should be lifting women’s long term prospects with more money in super. Dignity in retirement requires a decent retirement income.
“There are around 270,000 Age Pensioner households on rent assistance and giving each of them the additional rental assistance proposed by Grattan would cost only around $140 million a year. Such a measure is affordable within the overall Budget context and should be considered on its own merits.
“The Age Pension and rent assistance alone cannot provide an adequate or acceptable retirement for Australians. The paper misses the reality of retirement living costs in Australia and the aspirations of the community to live comfortably, not just survive, in retirement.”
Read the Grattan Institute’s report.
What do you think? Do you support an increase to the Age Pension for pensioners that don’t own their own home?
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Superannuation system fails women
