Thursday, July 20, 2017

Flawed by design: why superannuation fails women

Labor has a blind spot with women. In 1983 the newly elected Hawke government ratified the United Nations Convention on the Elimination of Discrimination Against Women as it had to, but entered two reservations. It wouldn't ratify the bit about employing women in combat roles, and it wouldn't ratify the bit about guaranteeing women paid parental leave.

That's right. Australia put itself in the unlikely company of Swaziland, Lesotho, Papua New Guinea and the United States as being the only countries of any size not to ensure that women who had children got paid while on leave.

Labor left it to the unions to pursue, which they did with greater and lesser degrees of vigour, occasionally going soft in their demands for paid maternity leave in return for other gains. It was an approach to delivering an essential provision that wouldn't have been tolerated for sick leave or annual leave.

A decade later, Hawke's successor, Paul Keating, introduced compulsory superannuation. As it grew, the pension was to become a mere back-up. Income in retirement was to be driven by lifetime earnings. If he had thought for a second about what that would mean, he showed no sign of it.

One in every two Australian women works part-time, compared to only one in every five men. And still more are employed away from the formal workforce where they don't get superannuation. On average those who are employed full-time get 20 per cent less than men. All up, it means women get 33 per cent less than men while in the workforce, and a lot less overall because they are often out of the workforce having children, caring for children or caring for relatives.

Super works well for high earners (who are mainly men) and the associated tax breaks make it work better for them still.

But low-earners and non-earners (who are overwhelmingly women) get next to nothing.

The Per Capita study Not So Super released on Thursday finds that women's balances on retirement are typically 47 per cent lower than men's. Seven out of 10 women have less than $150,000, compared to only four out of 10 of men. As the "independent progressive think tank" delicately puts it: "Superannuation was designed around a model of employment that is rapidly disappearing."

It was designed by men whose views were little affected by the changes going on around them. One was that menfolk would look after women. The women who had men wouldn't need that much super, because their men would hand over theirs. If the man died, they would inherit his super, and if he left them, they could go to the Family Court and demand their share.

A man was a financial plan, and the better-off the better. In the words of advice offered by a friend's grandma, "It is just as easy to love a rich man as a poor man."

But in the complicated, imperfect world in which we live, it's not that straightforward.

"Now at age 50 I have the grand total of almost $27,000 in my super," wrote one of the respondents to the Per Capita survey. "There is no possible way that in the working time I have left I am going to be able to provide funding for my retirement, and due to raising two children on a single income the possibility of owning a home was not an option either as we did not own when we separated."

"There are many like me who, after a mid-life divorce, accepted extra in the equity of their home so that the children were not disturbed rather than a share of his super," wrote another. "My husband had a for-life government pension which, after 20 years of support, I could not make a claim on. I maintained the home and full-time care of our child while he went offshore."

The Coalition wants to make it easier for women to top up their super, believing that will help. But it's hard for most women to do that, precisely for the reason that it's hard to accumulate employer contributions. They don't earn enough. In opposition Tony Abbott had a better idea than either the Coalition in government or Labor in government or opposition. It was to give women properly-funded paid parental leave and pay their super contributions while they are on it.

He was ridiculed. There was something about super he didn't get. It was that super was designed to be unfair. If it was designed to be fair it would take from everyone according to their ability to pay and give to everyone according to their need. Instead it takes from everyone (via their employer) whether they can afford it or not and hands out the most to the people who will need it the least.

In preparing their report Per Capita toyed with the idea of suggesting the system be scrapped and replaced with something that paid out according to need. Then it thought about the lobbyists who would be arrayed against it. There's $2.3 trillion in super, more than Australia's annual GDP, much of it sticking to the fingers of the finance industry. It concluded that it was too late.

In The Age and Sydney Morning Herald