Better Deal For Women
Sydney Morning Herald
Wednesday January 14, 1998
THE Association of Superannuation Funds of Australia (ASFA) launched its Internet site late last year. It has, among other things, a useful calculator allowing people to work out how much superannuation they will accumulate by retirement. In an interesting twist, it also compares the returns of superannuation funds with those of retirement savings accounts (RSAs).
It gives the example of a 25-year-old woman earning $30,000.
Assuming she gets an annual salary increase of 3 per cent, makes total superannuation contributions of 12 per cent and has a five-year career break between the ages of 30 and 35, she will have a superannuation fund balance on retirement at age 65 of $1,170,810.
This compares with the balance she would have in an RSA of $555,988, which is less than half. The example assumes contributions tax of 15 per cent and tax on the investment of 15 per cent. It also assumes the RSA earns between 3 and 5.8 per cent (depending on the balance) and the superannuation fund earns 10 per cent.
If ever there were an argument against the long-term use of RSAs this would have to be it.
That is not to say that RSAs don't serve a useful purpose. For small amounts of a few thousand dollars they are ideal. But obviously people saving in an RSA for their whole working life would be disadvantaged.
And if you are a woman, it is not only RSAs that may put you at a disadvantage. ASFA believes the whole superannuation system disadvantages women. Late last year Susan Ryan, the then executive director of ASFA, said the superannuation industry was failing women by not providing better retirement products.
She said there was room for the Federal Government to make superannuation savings more fair, particularly for women who spent many years out of the paid workforce.
Using ASFA's site to make some calculations, the figures back her up.
Using the same example as above, but taking out the five-year career break, a man in the same position would have $1,760,126 in his superannuation fund on retirement and $789,999 if he saved through an RSA.
As the ASFA site points out, superannuation contributions are generally based on a percentage of salary, and as women on average earn less than men, the contribution paid for women is on average less than the contribution for men.
Add to this ASFA's assertion that women spend an average of 17 years in the paid workforce compared with 39 years for men, and it is clear women are not as well off under the system.
Of course these figures will change as younger women enter the workforce and the average time women spend in paid employment increases. In the meantime, women on average earn less, so they contribute less, so they will retire on less.
You can find the ASFA's Web site is at www.asfa.asn.au
© 1998 Sydney Morning Herald