The Actuaries Institute has suggested three main initiatives to help address the gender gap in retirement in a study prepared to coincide with the current ‘2021 All Actuaries Virtual Summit’.
The report by a group of prominent actuaries and super specialists, tackles the decades-old issue of women retiring with less money than men from a different perspective, including the tendency for women to adopt a “carer’s role” within an extended family.
David Knox, a senior partner and the senior actuary at Mercer, and Michael Rice and Richard Dunn from Rice Warner, said the gender super gap began at the very start of a woman’s working life, peaking when she was in her 50s.
Knox said: “Australia’s performance has been less than stellar. Average super balances for women are significantly less than those for men, and one in three women are retiring with no super at all. Part of the solution needs policymakers and community commitment to change.”
Michael Rice, executive director at Rice Warner (now a part of Deloitte Superannuation (see separate report this edition), said: “Women are the fastest growing cohort of retirees living in poverty in retirement. It is the final outcome of a flawed system.”
In the paper, ‘Gender Inequality in Retirement Savings’, the authors argue for measures that include: a ‘carer’s credit’; fundamental changes to annuities; and, recognition and drive for change in the way the superannuation industry addresses women’s finances.
The report, published on April 29, recommends four main policy changes and several aims for society as a whole to work towards. The policy changes are:
- Remove the $450 monthly threshold which applies to the SG, which has been argued for some time by ASFA and specialist lobby groups including Women in Super
- Requite that the SG be paid on all paid parental leave, and
- Provide super contributions or ‘pension credits’ for all carers
- Lengthen the term permitted under catch-up provisions for super contributions.
The societal changes recommended for an increased focus are:
- Providing an increased focus on financial education for women highlighting the financial difficulties that many women face during their life.
- Using the example set by covid-19, to permanently allow staff (where practical) to work from home two-to-three days a week. This flexibility will save commuting time and allow parents more options for childcare
- Review the level of income paid within industries dominated by female workers
- Require lifetime annuities to be provided on a unisex basis. It is worth noting that defined benefit pensions are the same level for the same period of service for both genders. This practice should continue with the provision of annuities and other income products during retirement
- Require all retirement income streams to be indexed, at least to some extent, thereby reducing the shortfall in the real value of income in the later years.
- Permit the subsidy of smaller account balances by larger account balances which happens in the provision of all financial services, and
- Require the development of joint life income stream products thereby ensuring the provision of benefits to the survivor in a couple, who are normally women.
The summit continues until May 27. Australia will be hosting the International Congress of Actuaries in 2023 in Sydney. Information: www.actuaries.asn.au