Change the rules and super will boom: ANZ

If we could give more to super we'd add hundreds of thousands of dollars to our retirement, writes Byron Smith.

If the average 30-year-old woman could sacrifice just 5 per cent of their salary they’d add about $180,000 to their superannuation come retirement day.

Allowing all employees to salary sacrifice into super is one of five key rule changes around the contribution of money into superannuation accounts that should happen to improve women’s financial status at retirement, claims ANZ.

These changes would improve the super system, which was itself identified by the bank in a research paper released July 2015 as a contributing factor to the inadequacy of women’s super funds.

In the ANZ Women’s Report: Barriers to achieving financial gender equity, ANZ stated though women are participating in work more than ever, “… on average, women have just over half the superannuation savings of men at retirement age, even if they don’t have children or care for elderly parents and stay in work full-time”.

As a start to solve this inequity, ANZ’s submission to the Australian Senate’s inquiry into economic security for women in retirement (PDF) published February 2016, has recommendations to “… create a retirement saving system that is simple and fair — one that cultivates opportunities to achieve gender parity”.

In its submission, when it comes to super contributions, the bank recommends that the government:

  • extend low-income contributions (for those earning $37,000 or less)
  • allow all employees to salary sacrifice into their super
  • require super payments for those earning less than $450 a month
  • pay super on government paid parental leave and make large employers do so
  • lift super guarantee payments from the current 9.5 per cent to 12 per cent by 2020.

ANZ states these proposals are a starting point aimed at closing the current $92,000 superannuation gap at retirement between men and women. Of all the recommended changes to superannuation contributions, that bank says “the impact of salary sacrificing into super on an individual’s retirement balance is significant”. The following table shows just how significant this can be.


Impact of employees salary sacrificing 5%

Source: ANZ's Submission to the Senate inquiry into economic security for women in retirement


ANZ is not alone in this thinking regarding the benefits of changing contributions rules. The Financial Planning Association of Australia, in its submission, recommends parental leave super payments be enforced in legislation (PDF). A position backed by the Workplace Gender Equality Agency and the Queensland government, which notes the success European countries have had in narrowing the gender retirement gap through such measures.

The association also says the low-income superannuation contribution scheme should be extended, a position held by PricewaterhouseCoopers, with the Financial Planning Association adding that the level of contributions should be increased.

Both the association and PwC argue there should be a more liberal approach to concessional contributions made to super, which would cater to women’s broken employment patterns, such as when they take time off to care for a baby. The Queensland government says tax concessions should be progressive to help people on lower salaries (PDF). It also advocates an increase in super contributions.

Many other organisations participating in the Senate’s inquiry fix on changes to contributions as key to addressing gender inequality. In their interesting paper first published in The Australian Economic Review (PDF), Griffith University Professor of Finance Michael Drew and Queensland University of Technology Associate Professor Anup Basu wrote that women’s super contributions would have to increase to 15 per cent to make up for their usual career breaks and make their retirement savings even with men, a proposal that PwC and The Australian Industry Group recommends against.

In acknowledgment of the difficulty of such a radical measure, Drew and Basu say an alternative is to focus on “aggressive” investment strategies for women’s retirement savings to ensure solid returns.



Note: All PDF links to submissions to the Senate inquiry into economic security for women in retirement link to the inquiry's submission webpage