The Grattan Institute, the think tank which has become a consistent critic of the superannuation industry, lobbed another grenade over the fence last week, in a paper on how to close the gender gap in retirement incomes. This is a complex issue which has been widely discussed within the industry for years.
The latest report follows its recommendations last year that first-home buyers be permitted to use their super as a deposit on a home, and a report in 2015 suggesting several changes to the “expensive and unfair” super system, including lower limits on contributions and a 15 per cent tax on earnings in retirement.
The report is a 30-page paper (plus five pages of footnotes) titled “What’s the best way to close the gender gap in retirement incomes?”. It was delivered by Grattan’s Brendan Coates at the “Australian Gender Economics Workshop” in Perth last Friday.
The paper had two areas of recommendations:
- “better targeting tax breaks” in super, including to halt the planned increase in compulsory employer contributions, and
- reducing the favouritism in the old-age pension system for people who own their own homes by lifting the pension for those who don’t.
The Institute’s antagonistic attitude to super is difficult to fathom, given that it was funded at its launch in 2008 primarily by two Labor governments – $15 million each from the Kevin Rudd Australian Government at the time and the John Brumby Labor Government of Victoria. BHP added a further $4 million and then three other groups, including NAB, promised $1 million “over the life of the organisation”. Subsequent donors of lesser amounts appear to come from all segments of industry and philanthropy. The Institute does not accept commissions for any of its work.
Nevertheless, in the latest stoush, the language is getting harsher. ASFA and AIST both produced criticisms of the paper last Friday afternoon.
Martin Fahy, ASFA’s chief executive, described the paper as being “replete with Victorian-era proposals to fix the gender gap”. He said the paper 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.”
Fahy said: “Grattan’s goal is really all about saving Budget money in the short term. It ignores critical intergenerational challenges facing Australia. Their solution to closing the gender gap is to make most people worse off in retirement by slashing tax concessions and to rip $4 billion from individuals.”
ASFA’s view is that the solution to the gender gap in retirement savings lies in addressing issues such as the gender pay gap, disparities in the allocation of home and family care duties and the broken patterns of employment that many women experience.
Eva Scheerlinck, AIST’s chief executive, concentrated on the proposed cessation of the compulsory contributions at 9.5 per cent. She said this would deny most of the Australian population an adequate income in retirement and also lead to higher age-pension costs for taxpayers.
The current, legislated, schedule is for the Superannuation Guarantee to rise to 12 per cent by 2025, a delay of several years introduced by the current Coalition Government. She said the delays had not led to higher wages, as Grattan assumed, particularly for low income earners.
“Leaving the Superannuation Guarantee rate at 9.5 per cent will not deliver an adequate retirement income for working Australians, with many women (who currently retire with about half the super of men) particularly vulnerable,” Scheerlinck said. “A 12 per cent SG rate not only addresses the challenges of Australians living longer in retirement, it also ensures ensure that future generations of taxpayers – the young people of today – are able to support a rapidly ageing population.”
A lot of good work on the topic has been done by Women In Super, which has increasingly adopted more of an advocacy stance in its discussions with government.
Scheerlinck said AIST, in its submission for the 2018 Federal Budget, supported Women in Super’s policy proposal to provide an annual $1,000 super boost to qualifying low-income earners. AIST also supported policies to tackle the challenges faced by many Australians around housing and rental affordability, noting these issues were increasingly impacting on retirement well-being.
– Greg Bright