What the Budget(2011) could have done for Women! by Pauline Taylor

Women need to save more for their retirement not only because they live longer than men, but also because they generally earn less, are more likely to have time out of the work force and work part time. These factors have meant that the average retirement pay out for women is about half that for men.

Raising the superannuation guarantee from the current 9% rate to 12 % will not help close the gap because it is still applying a specified proportion to incomes that are lower and often irregular, resulting in a smaller nominal amount.

According to actuaries Rice Warner, a young woman needs to save 13% more for retirement than her male equivalent because she lives longer. ([1] Superannuation Savings Gap for Women Rice Warner 30 June 2009.) If she works part time or has a career break then this proportion needs to be even higher.

Making voluntary personal contributions to their superannuation at times that best suit them is the best way for women to catch up.

 In this regard, the Budget could have offered more incentives to help Women.

-          Extending the Government’s superannuation co-contribution to those temporarily out of the work force; such as on parental leave, carers leave or not working because of family responsibilities is one way to do this.

-          Another is not to penalise those who have delayed their super contributions because of the costs of raising a family and buying a home. The fact that the budget clarified the proposal to allow individuals aged 50 and over with less than $500,000 in super to contribute $25,000 more per year than other individuals from 1 July 2012 goes some way towards assisting women who are supplementing their superannuation savings later in life.

-      But women of all ages could be helped by aligning incentives to the level of superannuation account balance rather than income earned. Benchmark account balances could be estimated by calculating the amount of superannuation a person on the average wage receiving regular superannuation guarantee payments would have received at various age groups. If a person’s balance is below this, then tax concessions on contributions could be applied.

-        These benchmark account balances could also be used as a means test for applying the co-contribution to those not earning income because they are temporarily out of the work force such as on parental leave. Basing incentives on a person’s level of super rather than level of income could help not just women, but all those with lower and irregular income to build their super and reduce their reliance on the aged pension.