Is it just me or am I right in thinking that every time we take one step forward with superannuation, we take two steps back. This week our industry got the heartening news that the Federal Government has decided to adopt one of the key recommendations of the Financial System Inquiry (FSI) and enshrine a primary objective for superannuation. Sure, the FSI handed down its report in late 2014, but as that old saying goes, “Rome wasn’t built in a day”. It was a step forward; a big one.
At the same time there have been persistent rumours emanating from Canberra that the Government, purely as a fiscal measure, is thinking of lowering the general concessional contribution cap from $30,000 to $20,000. If this proves to be correct, and the Government does announce such a misguided policy in its May Budget, it will certainly be two steps back; two big steps.
Such a policy decision would be wrong on so many levels. But let me look at it through the prism of an issue that has been getting a lot of media airplay in recent months – the inequity of superannuation outcomes between men and women.
The statistics are well known; women retire on substantially less than men, in part due to lower average weekly earnings but also because of interrupted work patterns. Shared parental responsibilities might be the mantra; the reality is women still take responsibility for the lion’s share of child-raising.
So just when a woman gets to that stage of her working life where she is an position to tuck more money into superannuation, there is the possibility this option will be curtailed by $10,000. Assuming she’s 45 when this opportunity avails itself, and she intends working until she is 65, it’s easy to see what the absence of the compounding effect of an extra $10,000 a year will have over two decades. It will be in six figures. Comfortably. Hopefully I am wrong. After all, it’s not like women aren’t aware of the inequities inherent in superannuation. A recent research report, ‘Women and SMSFs’, undertaken by the SMSF Association and the Commonwealth Bank, found that SMSF trustees (especially women) saw flexibility as critical when it came to their contributions. To quote: “Just under half of the SMSF trustees (47%) would like more flexibility in the timing and amount of personal contributions people can make each year to allow them to catch up on their super after taking a break from work to care for their family.
“For those SMSF trustees that took parental leave, four in 10 indicated that they will now be older before they will be able to afford to retire.” I might be guessing, but I strongly suspect most of those wanting more flexibility and indicating they will have to delay their retirement are women.
There can be no argument that lowering the cap will impair the ability of women to save for a self-reliant, secure and dignified retirement. Remember, too, it’s not just broken work patterns, although that’s a major factor. Divorce or an untimely death of a partner are other reasons why women need flexibility. Quite simply, they need to be able to maximise their contributions when they can, and any move to lower the concessional caps simply diminishes their ability to do so.
What I am hoping is that the Government will do two things. First, devote its time and resources to establish a primary objective for superannuation (for my money, the FSI objective is fine) and, second, to shelve all other issues relating to superannuation until this is achieved. If, and it’s a big if, we can get consensus in the Parliament as to the primary objective of superannuation then it is to be hoped that much of the politicking that now surrounds this critically important policy area slowly disappears. At the very least it could give us the opportunity to remove superannuation from the annual budgetary debate, and all angst it brings for the millions of Australians who look to superannuation as their main retirement income vehicle.
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