Women's Policy Action Tank: women receive half the level of support through superannuation tax concessions than their male counterparts

It has been widely publicized that women’s superannuation accrual is significantly below their male counterparts' and often inadequate to support women in their retirement years.  This policy analysis identifies the current weaknesses in the legal structure and provides practical suggestions for rectifying the inequities. 

Scorecard on Women and Policy provided by Robbie Campo, Deputy Chief Executive, Industry Super Australia

Topic:  Federal Tax Policy

Sub-topic:  Superannuation



Women experience an unacceptable level of economic insecurity in retirement in Australia, now and into the future.

The Age Pension is the first pillar of our retirement income system, but for most women, it is the main pillar. 70 per cent of single women receive the full Age Pension. 38.7 per cent of single women live in poverty in retirement – and declining rates of home ownership will make this situation deteriorate further. It is estimated more than half of women currently aged 25-29 years (retiring in 2055) will not achieve a comfortable level of retirement income. Women’s economic insecurity in retirement stems from lower levels of lifetime earnings and fragmented workforce participation associated with the gender pay gap and unpaid caring responsibilities. While women’s workforce participation is increasing, it is mostly increasing as part-time work. The timing of gaps in earnings, and extended periods of part-time work which typifies women’s workforce participation means women miss out on the magic ingredient of superannuation - the steady accumulation and compounding of contributions and returns. A third of women are not in relationships by retirement age, and 40 per cent of couples have insufficient savings to fill the gap in women’s superannuation.  

The current settings within the retirement income system magnify the problem of gender differences in lifetime earnings.

The gender pay gap of 17.9 per cent blows out to a gap in super savings of 44 per cent. Despite very significant Government outlays to support and incentivise retirement savings through provision of superannuation tax concessions (currently $30 billion per annum), these concessions are not well targeted at improving retirement incomes. The bulk of concessions are paid to those who would have a comfortable level of retirement income even without that support.

The bulk of concessions flow to men – incongruously, men on average receive twice the level of support through superannuation tax concessions to save for retirement than women.

Recent changes announced in the budget – to convert the LISC into a new tax offset, LISTO, are welcome to ensure that the half of Australia’s working women will not be penalised by a higher tax on their super than on their take home pay. However, further rebalancing is needed to deliver a tax concession on super to low income earners, which includes 2 million women.

While the compulsory super system is on its way to delivering better retirement income adequacy for Australian men, it is yet to deliver the same universal benefits for women. Reforms which improve outcomes for women will improve the effectiveness and fiscal efficiency of the retirement income system more generally. 

Paring back the generosity of outlays on superannuation tax concessions would repair the key structural drivers of inequity and inefficiency in Australia’s superannuation and tax settings, and significantly improve outcomes for women. Other reforms which would improve women’s economic security in retirement include accelerating (or not further delaying) the current timetable of increases of SG contributions to 12 per cent and extending SG to paid parental leave. The critical importance of the Age Pension must also be recognised, and any further reforms which impact on eligibility or entitlement be assessed against their impact on women’s retirement outcomes. The recently changed Age Pension asset test taper rate aggressively depletes any benefit derived from other beneficial measures - including the SG increase – and this undermines the capacity for retirement income policy to improve outcomes for low to middle income earners. Regular official reporting of progress in improving retirement income for women is as important as reporting on the gender pay gap during working life.

For more information, see the recently released Senate Report: A husband is not a retirement plan

This analysis is a contribution to the Scorecard on Women and Policy project, initiated by the Women's Policy Action Tank.  We invite policy specialists in all areas to provide analysis of public policy using a gender lens:  womenspolicy@goodshep.org.au  Follow us on Twitter: @PolicyforWomen