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Why Super rules need to change

Most Australian women still retire with only a fraction of the super savings they need. Now momentum is building for change.


Recently, the Senate called for ideas on how the super rules can be changed to help women save more super. They received a raft of submissions from some of the country’s largest financial institutions — including the Commonwealth Bank.

Here are some of the reasons momentum is building for change, and some ideas to make our super system work better for women.

How big is the gap?

A recent Commonwealth Bank report revealed that the average single woman retires with just 47% of the super she needs for a comfortable retirement — whereas single men typically end up with 78% of the recommended amount, and couples with 98%.1

Why the gap? According to Annabel Spring, Group Executive for Wealth Management at the Commonwealth Bank, “Women typically earn less, are more likely to be the primary care giver for young children or ageing parents, and retire earlier.”

“All these factors impact on their earning potential and their savings for retirement. Given women have longer life expectancy than men, this creates a real barrier to equity for women in retirement.”

“Women typically earn less than men, are more likely to be the primary care giver, and retire earlier. All these factors impact on their earning potential and their savings for retirement.”

Research from Colonial First State also shows many women lack confidence when it comes to making financial decisions. The result is that they’re less likely to choose fast-growing investments like shares — which means they can miss out on higher returns over the long term.2

What needs to change?

Spring says it isn’t enough to expect women to close the gap on their own — it’s time for the rules of the game to change. “We believe a package of complementary superannuation and non-superannuation reforms is necessary,” she says.

Here are three key changes she would like to see:

  1. Help women save super while caring for kids. By building super contributions into the Paid Parental Leave Scheme, we can help women continue building super even when they’re on maternity leave.

  2. Lift contribution limits while women are working. By raising personal contribution caps, we can help women save more super while they’re in the workforce, so they can top up their super after a career break.

  3. Expand employer super to everyone. Right now, people earning under $450 a month don’t receive compulsory employer super contributions, which makes saving harder for part-timers and low income earners. By scrapping that threshold, we can make sure women keep saving super, even when they’re only working part time while raising kids.

Three ways to start saving more super right now

While it’s good news that the Senate is looking at ways to improve the super system, change won’t happen overnight. So it’s important for all of us to take control of our super now. Here are three simple steps women can take to boost their retirement savings:

  1. Contribute extra. By asking your employer to put some of your pre-tax income into super through salary sacrifice, you can boost your super now while paying just 15% tax on your contributions, putting you even further ahead.

  2. Get a government co-contribution. If you earn less than $50,454 in the 2015-16 financial year, you may be able to get a helping hand from the government when you make a personal contribution to super from your after-tax income — up to 50 cents for every dollar you contribution.

  3. Get financial advice. Your super is one of the most valuable assets you have, so it makes sense to get the most out of it. For a tailored investment strategy, talk to a financial adviser.

Disclaimer
Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling us on 13 13 36.