Super not so super after all for women over 50: UC research

Thu 26 May 2016

Women over 50 will be the worst hit as a result of the Federal Government’s changes to superannuation unveiled in the Budget, according to analysis by the National Centre for Social and Economic Modelling (NATSEM) at IGPA.

The proposal to reduce the superannuation pre-tax contribution cap, from $30,000 (and $35,000 for over 50s) to $25,000 has been found to have a larger impact on women aged 50-64 than on men.

NATSEM Professor Robert Tanton said women at this age tend to catch up with super contributions not made when they were younger (aged 30-49) and maybe raising young children.

“If women are penalised for doing this, then they’ll retire with a much lower balance overall, having contributed less when aged 30 to 49; and discouraged to make up payments from concessional contributions  when aged 50 to 64,” Professor Tanton said.

“We expect that this change will reduce the size of women’s superannuation balance over the long term, effectively leaving more women at risk of not having enough savings and possibly turning to some part of the age pension in retirement.”

NATSEM’s analysis found that the Government’s proposed changes mean women over 50 will pay an extra one per cent of their income each year in tax, while men would pay less than half that amount (0.42 per cent).

“We know that only people who are contributing more than $25,000 each year to their concessional contributions are going to be directly impacted by this change, but it will be twice as hard on women due to their lower income at this age,” Professor Tanton said.

When looking at incomes, NATSEM’s analysis found that the median income for men aged 50 – 64 affected by the changes was about $230,000, but the median income for women aged 50 – 64 was $113,000. This shows that women in this age group were trying to make up contributions using concessional contributions.

“This is an example where the Government has suggested a policy for a perfectly good reason (to reduce high income earners contributing large amounts in concessional superannuation contributions), but the unintended consequence is that a group of the population is greatly affected; in this case, women aged 50 to 64, who experience the greatest impact, while trying to do the right thing with their superannuation contributions,” he said.

To rectify this, Professor Tanton suggests an income cut off for higher concessional contributions; for example, a $30,000 cap for those earning less than $150,000 and a $25,000 cap for those earning more than $150,000.

“This would be in line with the current policy of a higher cap of $35,000 for those aged over 50,” he said.

The whole NATSEM analysis of the impact of the 2016-17 budget superannuation changes by age group and gender is available here.

Professor Tanton is available for interview. M: 0420 319 450


Contact the University of Canberra media team:

Claudia Doman: 0408 826 362

Marcus Butler: 0438 806 293

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