Australia has a persistent gender gap in retirement savings and incomes. Many commentators – particularly those associated with the superannuation sector – advocate for more generous superannuation tax breaks to boost retirement incomes. But expanding already-generous caps on superannuation contributions would likely worsen gender inequality in retirement savings. Other proposals to provide more top-ups to the superannuation savings of low-income earners, or particularly to women, are at least somewhat targeted at the problem.
But super is simply the wrong tool to provide material support for the retirement of low-income earners. With the Age Pension and Rent Assistance, government already has the right tools for assisting lower-income Australians. These tools can deliver much more targeted support to women at greatest risk of poverty in retirement, including existing retirees, without worsening the gender gap in retirement incomes.
This paper proposes two reforms that together could provide a boost to the retirement incomes of Australia’s most vulnerable women. First, better targeting super tax breaks to the purposes of superannuation would reduce the gender gap in superannuation savings. Second, a targeted boost to the Age Pension for retirees who do not own their own home, delivered as higher Commonwealth Rent Assistance, would do the most to reduce the risk of women experiencing poverty in retirement, while also reducing the gender gap in retirement incomes.
Grattan Institute Working Paper No. 2018-01, February 2018