AIST. 22 October Sex Discrimination Commissioner Australian Human Rights Commission Level 3, 175 Pitt St SYDNEY NSW 200. Dear Ms Broderick,

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1 22 October 2012 Sex Discrimination Commissioner Australian Human Rights Commission Level 3, 175 Pitt St SYDNEY NSW 200 Dear Ms Broderick, Application by Rice Warner Thank you for the opportunity to comment on the application made by Rice Warner to be excluded from the operation of the Sex Discrimination Act 1984 (Cth) in relation to superannuation contributions to their female employees. We do not intend to comment directly on the Rice Warner calculations that underpin their application. We accept the calculations, in Rice Warner s capacity is actuaries, as correct. Instead we address our submission to the efforts by and others to improve gender equality in Australia s superannuation and retirement systems, the inequities that continue to exist, and accordingly our support for Rice Warner s application an employer s attempt to redress some of this imbalance. About us The () is a national not-for-profit organisation whose mission is to promote and protect the interests of Australia s $450 billion not-for-profit superannuation sector. s membership includes the trustee directors and staff of industry, corporate and public sector funds, who manage the superannuation accounts of nearly two-thirds of the Australian workforce. As the principal advocate and peak representative body for the not-for-profit superannuation sector, plays a key role in policy development and is a leading provider of research. provides professional training, consulting services and support for trustees and fund staff to help them meet the challenges of managing superannuation funds and advancing the interests of their fund members. has been very active in advancing superannuation adequacy measures for women, as well as gender diversity on trustee boards to ensure greater representation of gender-related issues in superannuation savings. advocacy for improved retirement savings supports and works toward a superannuation system that is universal in its coverage of all Australians, provides adequate retirement income for all, and is designed to promote equity. We support Australia s three-pillared retirement income system, which is based on shared responsibility between individuals, employers and the Government.

2 To ensure that all Australians have enough saved for an adequate retirement, we believe the system requires refinement and reform with increased levels of self-provision required ensuring ongoing growth in retirement savings. We recognise that the Government must take current financial conditions into account when implementing reform, and acknowledge that not all of the required change can therefore rest with Government alone. Individuals and employers also have a significant role to play in our retirement savings system. advocacy and women has long recognised that the cumulative impact of gender pay inequity, less time in the paid workforce and higher life expectancy rates result in women having a reduced standard of living in retirement relative to men. Nearly two-thirds of retired women rely solely on the Age Pension 1 and an OECD report on member countries points to Australian women as being among the worst off in retirement. Currently, the average Australian woman retires with almost half the superannuation of her male counterpart. The average Australian woman at age 65 retires with $112,600, compared to $198,000 for men 2. Further, the majority of women retire with significantly less than this average figure and about one-third of women retire with no super at all. It is inequitable that women who take time out of the workforce to have children, or care for loved ones, have lower retirement incomes. believes a range of reforms are urgently required to bridge the superannuation gender gap and address the aspects of our current system that adversely and disproportionately affect women. Our advocacy initiatives to redress the imbalance include: 1. Campaigning for an increase in the compulsory superannuation guarantee (SG) from nine to twelve per cent of ordinary time earnings 2. Campaigning for the abolition of the $450 monthly earnings threshold to SG payments 3. Campaigning for the inclusion of an SG component to the paid parental leave scheme (and previously, the baby bonus) 4. Campaigning for the inclusion of the self-employed into the compulsory SG scheme 5. Campaigning for the introduction of a return-to-work bonus for older workers and women returning to the workforce after a family break 6. Campaigning for equal access to pre-tax salary sacrifice contributions for all Australians 7. Supporting the low income earners rebate on superannuation contributions 8. Supporting the abolition of the age restriction so that older workers are entitled to SG contributions over the age of Supporting access to concessional contributions for those over 50 years of age with superannuation balances below $500, Supporting the entitlement to split superannuation accounts in the event of divorce 11. Advocating that all superannuation funds have a minimum of 40% of each gender represented on their boards to ensure that the adequacy of women s superannuation savings is a consideration at board level 1 Treasury, The, Australia to 2050: Future challenges. The 2010 Intergenerational Report. 2 ABS, 2010, cited in Clare, R, Developments in the level and distribution of retirement savings. ASFA briefing paper, September2011, Association of Superannuation Funds of Australia, Sydney.

3 1. Increasing the SG from nine to twelve per cent strongly supports the Government s decision to provide an additional contribution of three per cent of salary, increasing the compulsory rate of superannuation contributions from nine to twelve per cent. While twelve per cent super is critical to improving the retirement wellbeing of all Australians it is particularly important for women. Because of their broken work patterns, lower wages and longer life expectancies, women need it most. campaigned to increase the SG to 12 per cent in its Now is the Time initiative and published an open letter to the Australian parliament, supported by 40 prominent Australian women, on 7 March The $450 per month threshold Workers earning less than $450 per month from any one employer have no entitlement to SG. The high concentration of females working part-time or casually is a contributing factor to their relatively low superannuation balances. Women comprise over 67 per cent of this segment of the workforce. 4 has long argued that abolishing the exemption on compulsory superannuation contributions for those earning less than $450 per month would benefit many women as well as males on low incomes, working on a casual or part-time basis. In female-dominated industries where working for several employers is common (such as retail, hospitality and nursing), many employees are excluded from the SG system because the $450 threshold applies only to a single employer, and not on a combined income level. 3. SG on parental leave entitlements Those out of the workforce while on paid or unpaid maternity leave (in general) attract no employer or government superannuation contributions over this period. In our submissions to Government, has strongly argued that a Government-funded parental leave scheme should incorporate a superannuation component, linked to the payment of SG contributions required on average weekly earnings. The Productivity Commission made similar recommendations, 5 however the Government did not implement the recommended inclusion of SG payments. The implementation of a paid parental leave scheme with a superannuation component would allow parents to continue building their superannuation whilst on parental leave. In the absence of a paid parental scheme with a superannuation component, we recommend a maternity-linked Government contribution, similar to the co- contribution, as a way of increasing equality within the system and enabling women to further grow their superannuation while on maternity leave. Specifically, as proposed in our submission to the Henry Review, we recommend the introduction of a baby bonus of up to $1,500 to be paid into new mothers superannuation accounts ABS, Employee Earnings and Hours, Australia, May 2010 (6306.0) 5 Australian Government, Productivity Commission, Paid Parental Leave: Support for Parents with Newborn Children 6 and Industry Super Network, 2009, Australia s Future tax System Inquiry: The retirement income system, A joint submission, [Online]. Available at: [Accessed 22 October 2012].

4 4. Self-employed SG contributions There are no requirements on self-employed workers to make superannuation contributions for their future retirement. Approximately 10 per cent of the Australian workforce is self-employed and 29 per cent of those people have no superannuation savings at all. 7 believes there is a risk of under-saving among the self-employed, who often choose to reinvestment in their own business. has advocated for a phased-in requirement for the self-employed in relation to SG contributions so that they are not solely reliant on the Age Pension and personal savings (if any) in their retirement. Female self-employed workers, with little or no superannuation, are seriously disadvantaged. 5. Return-to-work bonus Another key factor affecting the retirement outcomes for Australian women is their relatively low workforce participation rate compared to men, particularly between the ages of Amongst OECD countries, Australia ranks 23rd in workforce participation rates for women aged between 25 and 44. Given that a person must earn an income to qualify for superannuation contributions, any policy initiative that lifts female workforce participation should also lift the retirement savings of Australian women (provided they are not affected by the $450 monthly threshold). As such, we have urged the Government to consider introducing a one-off $2,000 return-to-work super bonus for qualifying parents who have spent time out of the paid workforce to raise children, or for older workers returning from an employment break. Such an initiative would have the benefit of topping up the superannuation balances of older workers, whilst also providing a strong incentive for women to re-enter the paid workforce sooner rather than later. A return-to-work super bonus could also help women engage with their superannuation at a critical point in their working lives where many would benefit from making voluntary contributions. 6. Salary sacrifice contributions Not all Australians are eligible to make pre-tax salary sacrifice contributions into their superannuation. The ability to salary sacrifice is provided either through agreement in industrial instruments or by direct agreement between an employee and their employer. In many cases, information about this arrangement is only available to employees when they proactively seek the information from the employer. A significant number of Australian workers do not have access to salary sacrifice arrangements. Salary sacrificing into superannuation is a sensible means for employees to supplement their provision for retirement. has recommended that the Government legislate to provide all workers with the ability to make pre-tax salary sacrifice contributions to their superannuation fund. Greater access to salary sacrifice should increase the effectiveness of superannuation as a long-term investment vehicle, and is another means whereby women can boost their retirement savings. 7 ABS, Labour Force, Australia (cat. no ); Labour Force Historical Timeseries, Australia (cat. no ) sourced 11/1/ ABS, Labour Force, Australia (cat. no ); Labour Force Historical Timeseries, Australia (cat. no ) sourced 11/1/2012

5 7. Low income earners rebate strongly supports the low income earner s rebate whereby the contributions tax is rebated to workers earning less than $37,000 per annum. As many women fall into the lower earnings bracket, the rebate of contributions tax will assist these individuals to build their superannuation balances. 8. Age restrictions on SG contributions Until recently employers were not required to pay SG on the salaries and wages of workers over the age of 70. This disadvantages workers, especially women - who have a longer life expectancy than men. supports the abolition of the age restriction on SG payments so that workers, and especially women, can have the opportunity to continue to grow their superannuation in their later working life, if they choose to remain in the workforce. 9. Concessional contributions is pleased that the Government supported our recommendation 9 for a permanent increase in the concessional contributions cap to $50,000 for those at least 50 years old with a super balance below $500,000. This would extend tax benefits to those in later working life and accommodate catch-up contributions, especially for women who already have low balances resulting from broken periods of workforce participation due to family commitments. However, this policy initiative has been placed on hold by the Government and currently the concessional contributions are capped at $25,000 per annum for everyone. 10. Superannuation and divorce In the event of a relationship split women no longer have the benefit of their husband s superannuation savings in retirement unless the superannuation is divided in accordance with the Family Law Act 1975 (Cth) splitting provisions. In circumstances where the woman takes time out of the workforce to take on family responsibilities, she is not earning income and therefore also missing out on growing her superannuation savings. This impacts on the woman s capacity to finance her own retirement and a relationship split means that she will not have the benefit of her partner s superannuation savings unless it is accessed in the financial settlement in accordance with the Act, and then not over the partner s working lifetime. supports the ability of women to access their partners superannuation in the event that the relationship comes to an end to augment their lower retirement savings. 11. Women on superannuation boards Only 21 per cent of trustee directors on not-for-profit superannuation boards are women. Accordingly promotes the following aspirational gender targets: that all boards have a minimum of 20 per cent women on their boards by the end of 2013 (for those that are currently below that target) and all boards have a minimum of 40 per cent of either gender by is working together with its member funds and the organisations with nominating rights to the board, to improve gender diversity among trustee directors. will launch a twelve-month Super Springboard program for women in November 2012 in an effort to assist superannuation funds to 9, (), 2011a. Response to Treasury: Concessional Superannuation Contribution Caps for Individuals Aged 50 and over. Submission, [Online]. Available at: [Accessed 24 January 2012].

6 appoint capable female directors to their boards. More female representation on boards will ensure greater consideration of the gender imbalance in superannuation savings. Conclusion It is not disputed that women, on average, live longer than men. This means that any retirement savings they accrue during their lifetime need to last longer. Other factors also impact on a woman s ability to grow their superannuation balances: time off to be the primary care giver for children and relatives in need; lower on average salaries than men; more likely than men to work in casual or part-time employment; and in the event of divorce, losing the opportunity (in most cases) to benefit from the spouse s superannuation. As superannuation is predicted on earning wages, women are clearly at a disadvantage. They earn less, have periods where they earn no income at all, and then re-enter the workforce at a lower rate of pay than their male colleagues. With superannuation earned as a per centage of wages, it is no surprise that women have far less in their superannuation accounts than men. This ultimately impacts on their lifestyle in retirement, a time when they will need to make less last longer due to their longer life expectancies. The Government has done much to improve equity across the superannuation system for low- and middle-income workers since the introduction of compulsory superannuation in However, the gender-specific issues that see women retiring with less superannuation and a longer life expectancy have not been resolved. Any initiative that helps women to overcome this imbalance should therefore be seriously considered. applauds Rice Warner for attempting to redress the gender imbalance that exists and recognising the potential longer term impact on the lives of their female employees. The initiative to make additional superannuation contributions for their female employees to offset longevity risk is admirable, and together with their planned education program, will go some way towards redressing the disadvantage. supports the application by Rice Warner to be exempted from the operation of the Sex Discrimination Act for their workforce. Yours sincerely, Eva Scheerlinck Trustee Governance & Professional Standards Manager