A recent report, Equity and Superannuation – the Real Issues, published by the Association of Superannuation Funds of Australia (ASFA), focuses on five groups falling into this category: the self-employed, individuals on paid parental leave, very low-income earners, indigenous Australians and recently-divorced individuals.

Australia’s super system is often named as a world leader in retirement savings. However, the fate of these five unfortunate groups tends to receive relatively little attention compared to other headline-grabbing issues.

Ross Clare, ASFA’S director of remuneration and the author of this new report, has long made it his business to try to highlight the plight of super’s most disadvantaged.

Consider these points made in Clare’s study:

• The self-employed: About 29% of the self-employed have no super. This is because compulsory super only applies to employees.
• Individuals on paid parent leave: Clare notes that paid parental leave payments are treated as wages for income tax purposes yet superannuation guarantee contributions do not apply. “One of the reasons that the average superannuation balance of women is lower than that of men is time out of the paid workforce for parental reasons,” he comments.
• Very low-income earners: An estimated 250,000 individuals, mostly women, do not receive compulsory super contributions because their monthly income is less than $450 a month – the threshold for superannuation guarantee contributions.
• Indigenous Australians: “Superannuation coverage for indigenous Australians is about 70% for men and 60% for women,” Clare writes, “compared to rates of 85% for men and 80% for women for the population more generally.” And their average balances are lower.
• Recently-divorced individuals: “Divorce can have a substantial impact on living standards in retirement, particularly when one party to a marriage has significantly less superannuation,” says Clare. He observes that amendments to the Family Law Act 10 years ago to allow for the splitting of super savings upon a marriage breakdown have led to a more even division of separating couples’ super savings.

Discussions about the inadequacy of superannuation savings tend to take a much sharper focus when the conversation is widened to cover the many Australians who are left either at the fringes of super or left right out of the super system.

By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
2nd October 2012