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The $18b argument for joint accounts

In Senate inquiry submissions, a strong argument is made for couples' joint super accounts, writes Byron Smith.

Joint superannuation accounts, owned equally by both partners in a relationship, would be a great equaliser for women, who currently retire with much less super than men, and they would increase aggregate super savings by $18 billion by 2044, says ANZ.

Joint accounts would mean greater flexibility, less fees, more engagement, efficient insurance and more equality in divorce, claims the bank in its submission to the Senate’s inquiry into economic security for women in retirement (PDF).

“Many couples pool their finances, have joint bank accounts and mortgages, combined savings and income, and are joint owners of assets. Yet, when couples save for their retirement, superannuation funds require them to save individually,” states ANZ in its submission.

While a joint account, in itself, won’t boost a couple’s super by much, financial services consultancy Rice Warner says it will simplify administration and engage people more with their super, making it a worthwhile change. In its submission to the inquiry the consultancy says married couples should be allowed joint accounts (PDF).

“Australian families usually pool their finances and have joint bank accounts for running the household … Yet, when Australian families save for their retirement, they are required to have separate superannuation accounts. Why can’t the 6.6 million families of working age pool their superannuation into a joint account?”

  

Equity in divorce

One of the most significant effects of a joint account is in creating a more equitable outcome in the event of divorce. A study by Suncorp’s superannuation business in 2012 found at the average age of divorce, men have $128,000 in superannuation and women have $42,000. It is normally the second biggest asset for a couple, yet only considered in 17 per cent of divorce settlements.

“Joint accounts would be more equitable for women in the event of divorce, because they would be automatically considered in the division of assets,” states ANZ in its report to the inquiry.

This is a point reinforced by Deloitte Touche Tohmatsu, which recognised that now and into the future, women are and will retire without the funds they need to sustain themselves. Deloitte, in the fourth recommendation in its letter to the Senate inquiry, says super must be divided equitably at divorce (PDF).

“It is a fact that single women, particularly those who are divorced, are one of the most disadvantaged post retirement groups … it would be relatively straight forward to implement rules in the Family Court that required superannuation to be divided on more equitable grounds which better reflected the woman’s ability to save additional monies for retirement as well as her additional longevity,” writes Deloitte’s Australian chief executive officer Cindy Hook.

A reduction in fees is another benefit. In administration fee savings alone, handling one account instead of two would add $4800 to a joint super account (for Millennials and those younger in age). By 2044, ANZ says joint accounts would increase aggregate super savings by $18 billion, having a flow-on effect to government revenues.

For joint accounts to work effectively, in its submission ANZ recommends the cap on contributions for such accounts to be higher and that rules relating to transition-to-retirement be reconsidered.

 

 

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