Superannuation not so super for women alone

This is a story about why after 20 years of compulsory superannuation payments, many older women without partners, will be forced to live on the age pension of about $344.00 per week.

Life expectancy for Australian men is now 84 years of age and 88 years for women. So, if a woman living alone is planning to retire at 65, her retirement savings may need to last more than 20 years.

For those at retirement, average superannuation payouts in 2009-10 were $155,000 for men and $73,000 for women. This is nowhere near enough for single, divorced or bereaved women, as they must pay higher living costs for goods and services compared to couples.

It is astounding to think that the OECD considers the poverty line in Australia at an income of about $32,000, while many women without partners can expect to survive on the age pension, which for a single person is about $18,000 per annum.

It is also galling that some commentators in the superannuation industry believe that a woman can survive on $18,000 per annum because 'they are used to it'.

A single, divorced or bereaved woman who 'retires' at the age of 65 - assuming part receipt of the Age Pension – will require a lump sum at retirement of between $400,000-$500,000 contingent on life wants and needs. I'm presuming reasonably frugal expenses.

The level of retirement savings accumulated through superannuation is dependent on two key factors: participation in the paid workforce and lifetime earnings.

For working single women, lifetime earnings are shaped by experiences, decisions and events at a number of critical points across the lifecycle. Fate is not democratic and every woman's work and life cycle is unique.

The reasons for a single, divorced or bereaved woman's low superannuation balances are manifold but includes her level of education, career choices, pregnancy, caring for children, re-entry to the workforce, caring for elderly relatives, domestic and family violence and divorce or separation.

Other factors include whether she owns her own home or is renting, her levels of debt, health and care expenses and whether she lives with extended family.

Women who are marginalised due to their race, disability, age, sexuality and socio-economic status, experience additional barriers to workforce participation. This affects their employment rates and earnings, and consequently, their retirement savings.

According to the Australian Bureau of Statistics (2006), women's superannuation balances as a proportion of men's balances decrease from 71.1% (25-34 age bracket) to 46.1% (60-64 age bracket). These figures are set out in table below.

Retired men aged 55-64 years have around 1.7 times the disposable weekly income of retired women in the same age group.

Yet according to the Productivity Commission report, the contribution of mature-aged women to total hours worked in the economy has increased from 6 to 15 per cent over the past three decades. Much of this includes part time and casual employment.

This is not to suggest that single or divorced men will live on 'easy street' post retirement. I simply states that the probability of women who suffer divorce, have no inheritance, who have children and work part time or casually, are candidates for penury in old age. They simply were not in a position to accrue sufficient superannuation.

What we do know is that in 2008, according to the Australian Institute of Health and Welfare (AIHW), for the first time on record there were more older women than men in homeless shelters.

This may be attributed to higher rates of divorce and separation and the tendency of women to be in lower paid jobs. This has in turn created a housing crisis for women in their fifties and sixties.

If the Government eliminated the superannuation tax concessions for upper income retirees and redirected some monies towards employment programs for mature age females, this would knock off the rough edges of living on low weekly income.

Australian taxpayers contribute $27 billion a year in superannuation tax concessions (about the same as what the age pension costs) that enable some retirees- whose homes are paid off and children gone - to enjoy a tax-free income higher than that earned by many people with young children, and mortgages and tax to pay.

The tax concessions on superannuation are fundamentally inequitable because they're not taxed at the marginal tax rate. It's a 15 per cent flat rate. The "tax effectiveness'' of super is most stark for those on incomes of $180,000 and more- those who earn up to $37,000 get nothing.

Richard Denniss and David Baker of The Australia Institute, in a report titled What Price Dignity? explain the system this way:

"If taxpayer support for superannuation was provided in the form of annual cheques rather than less transparent tax concessions, a person earning $30,000 per year would receive a cheque for $0.00 while someone making the compulsory 9 per cent contribution on an income of $200,000 per year would receive a cheque for $5,400 each year."

As Bette Davis said, "Old age is no place for sissies," but unlike the famous millionaire film actress, tens of thousands of Australian women who raised a family, who sacrificed their own careers and worked in part time or casual jobs, cannot look to retiring in comfort without the wolf hanging around their front door.