SUPERANNUATION

Women's Action Alliance believes that security in retirement should be available to all Australians.

As our population is ageing and our capacity to fund pensions in their present form will be limited in the future, all Australians should have access to and be encouraged to take out superannuation, regardless of whether or not they are in employment.

Single income families should be able to take out superannuation in the name of the non-earning spouse in any scheme to which the earning spouse is eligible, with all the consequent tax benefits. This could be achieved by the earning spouse's Superannuation Guarantee contributions being split in two parts - one part to be deposited in his/ her own name and the other in the name of the non-earning spouse. The employer's contribution would likewise be split between the two memberships. In these circumstances, the Reasonable Benefit Limit (RBL) should be based on half of the final salary of the earning spouse.

In addition, a means tested superannuation voucher scheme should be available to welfare recipients and those on low incomes to allow them to participate in any scheme to which they may be eligible. Such benefit should be in a form which could be used solely for the purposes of superannuation.

INTRODUCTION

Superannuation is an issue which has received increasing attention in Australia over the last few years from a wide rang of interest groups. There is a very valid reason for this interest. Australia's ageing population is a fact which will cause great problems for society unless solutions are found and implemented now. Currently the over sixty-five component of the population in Australia is about 14 per cent: by the year 2041 it is expected to reach 22 per cent.

What does all this mean for those contemplating retirement in 20-30 years time? It means that, unless radical changes are made, an increasing proportion of the population will be relying on the age pension, while a declining proportion of taxpayers will be required to support them. The result? An overwhelming taxation burden on future generations of Australians.

For these reasons, Australia needs to be, and in fact is, looking to other methods of retirement support, the most important of which is superannuation.

WOMEN, SUPERANNUATION AND PAID EMPLOYMENT

Superannuation entitlements have traditionally not favoured women in a number of ways.

IS SUPERANNUATION RELEVANT TO WOMEN?

Women have often ignored superannuation either because it does not adequately cater to their needs, or because they intend to rely on their husband's superannuation. However, women need to seriously consider superannuation for two reasons.

Firstly, women cannot assume that they will be supported by their husbands in retirement, with one in three marriages ending in divorce. The Family Court's attitude to superannuation is somewhat ambiguous and still evolving. Although the court usually regards accumulated superannuation funds as joint assets, there is certainly no requirement to take retirement benefits into account in any property settlement. The Howard Government has indicated its intention to change these requirements.

Secondly, women tend to outlive men and the majority end their lives living alone. If they rely solely on the age pension they will be living below the poverty line.

WOMEN AT HOME

Many women who work full-time at home in an unpaid capacity have limited access to superannuation. It is possible in some settings for an employer to make contributions to a superannuation fund on behalf of an employee's dependants and to obtain a tax deduction for these contributions. But a condition applies. Those receiving superannuation via their spouse's employer must be "gainfully employed" for at least 10 hours a week.

A provision introduced in recent years allows a woman to continue to contribute to her pre-existing scheme for up to seven years while on leave from the paid workforce. However, while having no income from which to make contributions, her capacity to accumulate funds is likely to be extremely limited and they will be significantly eroded by administrative charges and taxation which is levied at the rate of 15 per cent on all employer contributions.

Retirement Savings Accounts ( RSA) are accounts into which an earning spouse can make superannuation contributions on behalf of the non-earning spouse. A tax rebate of 18 per cent will apply to contributions up to $3,000 pa. However, RSA's will only benefit couples who have sufficient disposable income to make extra superannuation contributions and will be well outside the reach of many families who are living on one income. As RSA's are capital guaranteed, the returns to the investor are considerably lower than those available via those on industry funds.

WOMEN AT HOME ARE EMPLOYED

Leaving women at home so disadvantaged with respect to superannuation ignores the fact that they are employed, although unpaid. They perform work of measurable economic value to society as a whole. If superannuation continues to be largely unavailable to them, while it becomes increasingly common for those in the paid workforce, women who work at home will become the new age of social welfare dependants, perceived as a burden on society, their years of unpaid service forgotten. Some further method of providing superannuation for these women must therefore, be implemented.

DISCRIMINATION AGAINST SINGLE INCOME FAMILIES

Leaving a woman reliant on her husband's superannuation places a great drain on the family incomes as the level of superannuation needs to be sufficient to provide for both spouses in retirement. In this regard the current regulations discriminate against the single income family in two ways.

SOLUTION

There is a way to eliminate both the problem of discrimination against the single income family and the lack of recognition of women at home.

The basic requirement is an amendment to the structure of superannuation to allow it to be taken out one behalf of those not in the paid workforce. RSA's would be complemented by a provision in both industry and employer sponsored schemes which would allow an employer to contribute to the scheme on behalf of his/her spouse. In the industry funds this could be required by regulation.

While there is no way to enforce such a provision in employer sponsored finds, such funds should be encouraged to allow contributors the same option, perhaps through some tax incentive. Personal schemes should be available to those not in paid work, increasing the deduction for a single income family.

Such a system should have a number of advantages.

Firstly, it gives the single income family the ability to eliminate the taxation discrimination, as two superannuation schemes would be entitled to two tax free thresholds.

Secondly, it would ensure some provision for the wife should the marriage break down at a later date. While the husband may discontinue payment after a marriage break up, the money already in her account would be preserved for their until retirement.

With regard to the Reasonable Benefit Limit, where the couple have taken advantage of the ability to contribute to two superannuation schemes the RBL should be calculated on the basis of half the final salary of the paid spouse.

THE SOLE PARENTS AND THOSE ON LOW INCOMES

So far nothing suggested would improve the position of sole parents and those for whom superannuation is an unaffordable luxury because their incomes are too low. There is an argument that these people should be left to receive the age pension. However, there is an alternative which would provide some dignity for those in this position, and give them the option of superannuation.

A means tested voucher system could be set up. The vouchers could be provided to all those below a set income to be invested in any superannuation scheme to which a person has access. For those in paid employment, this could mean an industry or employer scheme, or a personal fund. Those in receipt of welfare would be limited to the latter, however, as most people are not on welfare all their lives, other options may well open up in the future.

The voucher would need to be in a form which could only be used for superannuation and could not be cashed in and spent.