How can superannuation be considered universal when it appears to discriminate against half the working population? With recent changes to the eligibility rules for spouse/partner contributions to super (brought in on 1 July 2017) it seems that policy makers are waking up to the shortfall in women’s superannuation. We look at some of the key causes that may affect you, and what actions you should consider taking in relation to your super.
It may not be the super system itself that is unfair to women, but rather that it doesn’t extend to “unpaid” or temporary/casual work, including domestic work mostly undertaken by women, or seek to cover those in less formal working roles.
Whatever the cause, a disparity exists: A recent 2017 survey by HILDA (Household, Income and Labour Dynamics in Australia) found that women retire with an average super balance of $230,907 compared to men, who, on average, retire with double this amount. One in three women is heading towards retirement with no super, or a very small fund.
There are a number of factors that contribute to this shortfall, notably the gender pay gap, and the reality that women are far more likely to spend time out of work in comparison to men, to work part-time, to bring up children, or to care for elderly or sick relatives. The universal Superannuation Guarantee (SG) system was conceived 25 years ago, based on income from full-time, dependable employment.
In addition to this women tend to live longer than men, meaning that planning and looking after their super is essential.
Are you a woman aware of a shortfall in your super? Have you reviewed your super recently? If so now might be a good time to look at some practical strategies to boost your super, whatever your age.
Start super early
Even if you don’t have much capacity to put aside extra money for retirement, there is still a lot you can do to maximise your retirement benefits. No matter how small, compounding savings over a long-term horizon can produce substantial benefits.
If you can, plan early because having an adequate amount in your super by retirement age (current retirement age in Australia is 65, rising to 67 by July 2023) is dependent on growth of the fund over time. The earlier you start saving in super, the longer time your fund will have to accumulate. Saving for retirement is tax-effective via super as there is a lower rate of tax charged on super contributions, and from the age of 60 you can withdraw your super without paying tax.
Your employer should contribute 9.5% of your salary or wages to super if you are in full-time employment, or even part-time employment. An employer will usually select a default fund on your behalf, but you can choose your own nominated fund if you wish.
Find lost super
You may have lost track of a super fund, for example, if you have worked on a part-time basis or you have moved house, changed your name, or lived overseas. You can check this and track your entire super from your MyGov account: https://www.ato.gov.au/Individuals/Super/Keeping-track-of-your-super/#Checkyoursuper
Know your super/grow your super
It may be difficult to keep up with detail of changes made to super, but it’s critical that you know the value of your own super as a starting point. Once you have located what super you have, you can check your balance/s, how much is being contributed, what investments are being made and any insurance that is in place. You can also add to your fund by making additional payments, either through salary sacrifice made directly from your employer, or by my making your own non-concessional contributions (after-tax super contributions).
If you take time off to care for someone or to have a child, keep in mind that this will affect your super. You can use the career break super calculator to work out how taking time off will affect your super balance. If at all possible it is worth continuing to pay into your super while you are not working.
Individuals with total super balances less than $500,000 can make additional concessional contributions for unused cap amounts from the previous five years, starting from 1 July 2018. This will be a handy measure for those with a capacity to make “catch-up” contributions to boost their super.
Spousal/partner contributions – tax offset – change to eligibility
A tax offset of 18% up to $540 is currently available for any individual, married or de facto partner, contributing super on behalf of a recipient spouse/partner whose income is up to $37,000. Eligibility rules were extended from 1 July 2017 by the Government to increase this amount from $10,800. However, this offset is gradually reduced from income above $37,000 and disappears completely at income above $40,000. Individuals who are receiving such a contribution must be under 70 and if aged 65 to 69 must meet a work test.
A Government co-contribution up to $500 is also available for individuals with total incomes up to $36,813 for 2017–18 (phasing down for incomes up to $51,813).
While you can often choose the fund into which super is paid, you may already have more than one super fund. Look into consolidating your current super funds if this is the case because contributing to one super fund, rather than many different ones, will mean you spend less on fees (as each super has an administration fee).
It is also is easier to keep track of one fund. Key things to consider when choosing a fund are the long-term average returns of that fund and the fees that are charged – make sure you are comfortable with both. Before switching funds, it is also important to consider any insurance implications. Some funds require new members to undergo a medical test before insurance benefits are granted, while other funds may automatically offer transferring members insurance under a group life policy.
Strategy for self-managed super fund – get advice
You may not be in a job where your employer pays your super, or you might want to manage your own super fund. If so, you could consider a self-managed super fund (SMSF). This is a legal structure (regulated by the ATO) with the specific purpose of providing for your retirement. There are similar rules and restrictions to ordinary super funds so it is important to seek advice about whether an SMSF would suit your situation, how to set up your own fund and investment strategy going forward.
Talk to us
Please contact our office to discuss your circumstances and find out how we can assist further. We may be able to help you with advice on investment strategy, or put you in touch with those who can.