Super reform required to close gender gap

Australia’s retirement income system has been ranked sixth in the world in this year’s Mercer CFA Institute Global Pension Index (MCGPI), however Australia’s superannuation system still faces the challenge of solving the gender super gap.

Comparing 43 global pension systems encompassing about two thirds of the world’s population, the study gave Australia’s retirement income system a B+ rating, meaning it had a sound structure with many positive features.

But there was still scope for improvement with Iceland, the Netherlands and Denmark found to be the best countries when it came to sustainable and well-governed systems, all receiving an A- grade.

One of the key problems revealed by the study for pension systems around the world, including Australia, was the need for systemic change to reduce the gender pension gap.

The MCGPI’s analysis highlighted that there was no single cause of the gender pension gap, despite all regions having significant differences in the level of retirement income across genders.

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Senior partner at Mercer and lead author of the study, Dr David Knox, said: “The causes of the gender pension gap are mixed and varied. Every country and region, including Australia, has employment-related, pension design and socio-cultural issues contributing to women being disadvantaged compared to men when it comes to retirement income”.

CFA Institute board of governors and MCGPI advisory board member, Maria Wilton, said the gender pension gap represented another challenge with women globally facing poorer financial outcomes.

“This is the case also in Australia where despite the Age Pension safety net, older women are at greater risk of homelessness and poverty,” Wilton said.

“Specific measures to level the gender playing field with respect to retirement outcomes will require concerted effort by policymakers and industry stakeholders.”

After removing major and well-known factors, such as there being more female part-time workers and more females who had periods out of the workforce due to primary care responsibilities, the study found that pension design flaws were still aggravating the issue.

The pension system issues highlighted in the study included:

• Non-mandatory accrual of super benefits during parental leave;
• The absence in most systems of super credits while caring for young children or elderly parents; and
• Differing annuity rates for men and women.

Knox said: “There are a number of initiatives that Australia could introduce, including removing eligibility restrictions for individuals to join employment-related pension arrangements. Regardless of how much you earn, how much you work, or for how long you’ve been working, every person in the paid workforce should have the ability to participate in a superannuation scheme that provides adequate benefits.

“Paying superannuation on parental leave is a first step, but there is an opportunity to go further to introduce superannuation credits for those caring for the young and old. Carers provide a valuable service to the community and shouldn’t be penalised in their retirement years for taking time out of the formal workforce.”