Last year, after reading more advice on how individual women could overcome the gap in retirement savings, the Australia Institute’s chief economist Dr Richard Denniss decided to write some advice of his own.
To avoid the pitfall of retiring with insufficient superannuation, he recommends women follow these four rules:
1. Don’t go into caring professions. Do not be a nurse, or work in childcare, or do a job where you help other people, because we will pay you low wages.
2. Don’t take time out of work while you are young. Do you not understand the way compound interest works? If you do take time out of work while you are young, it will have a catastrophic effect on your retirement income.
3. Don’t take time out of work to care for your parents, or your partner’s parents, in your 50s. These are your peak earning years, so you need to work as long as you can and put as much into super as possible.
4. Do not be a woman. Because we will pay you roughly 17 per cent less than a man for similar work.
It is starkly divergent from the proliferous advice women receive about their financial security: that if they were more financially literate or made better decisions or picked a better super account, they could minimise the retirement gap.
“If you read some of the advice aimed at women, you could be forgiven for thinking retirement income is like a nice pair of shoes and it’s your job to hunt down a bargain,” Denniss says.
The reality, he says, is that no information campaign, decision-making tool or new website can assist women overcome the structural flaws in our superannuation system.
The gap between what men and women retire with in Australia is incontrovertible.
A report by the Senate’s economic committee last year found that one in three Australian women retire with nothing at all, and that on average men end their working lives with superannuation balances twice as large as women’s.
According to the Workplace Gender Equality Agency, the average Australian man retires with $197,054 while the average woman retires with just $104,734. This represents a 46.6 per cent gap.
It is exacerbated by the superannuation tax concessions, which the Senate report concludes are poorly targeted. Men, in aggregate, receive double the superannuation tax concessions as women.
“The existence of super tax concessions is heavily stacked against women,” Denniss says. “It’s inequitable, and because women are more likely to be poor it’s particularly inequitable for women.”
As it stands, low-income earners pay more tax on their retirement savings than they do on their ordinary income. By contrast, high-income earners pay far less tax on their superannuation contributions than on their salaries.
Poorer people effectively pay a penalty tax on their super while the wealthiest 5 per cent of the population reaps more than $10 billion a year in tax concessions.
Women, who comprise the majority of the 3.6 million Australians who earn less than $37,000 a year, bear the brunt of this double whammy.
It makes the emphasis on women’s financial skills a little galling to Felicity Reynolds, the chief executive of the Mercy Foundation.
“It is a generalisation, but I would suggest that there are many women who are very, very good at managing a very small amount of money, and I think that gets lost,” Reynolds says.
Increasingly, she sees women being offered educational programs rather than solutions for affordable housing and structural inequities.
“These women could teach courses on saving money,” Reynolds says. “It’s less about a lack of financial literacy and more about a lack of finances due to structural inequity.”
Denniss agrees. “The focus on education is the perfect political strategy if you want to maintain the status quo,” he says. “Not only do the campaigns further confuse people, they are effective in making individuals blame themselves for the situation rather than question the whole system. We need to fundamentally change super and retirement income in Australia.”
Tax concessions cost $29.6 billion a year and the vast majority of those flow to high-income earners. Treasury estimates suggest that tax concessions given to the wealthiest 1 per cent of income earners is far more expensive than simply paying them the age pension.
As a case in point, Denniss cites the Tax Office’s revelation that there is a self-managed super fund with a balance of $100 million.
“If the account holder is over 65, they would be able to draw down $10 million a year and pay zero tax on it. Zero,” Denniss says.
How providing a tax break to a person who would never have been eligible for the age pension is supposed to “save money” is unclear. Regardless, a woman who spends her life earning the minimum wage is unable to access a similar tax break.
So if you are a woman looking to prepare for retirement, it’s wise to examine the fees your super manager charges and look to making additional contributions. But don’t be fooled into believing that through smart choices you can overcome the retirement gap between men and women.
For that, you’ll either need to follow Denniss’ advice or lobby for reform.
Georgina Dent is a journalist, editor and TV commentator with a keen focus on women’s empowerment and gender equality.
This story Administrator ready to work first appeared on Nanjing Night Net.