Voluntary superannuation contributions, co-contribution schemes and
In this chapter, the committee continues its consideration of possible
reforms to the superannuation system to help address the superannuation savings
The previous chapter dealt with the distribution of superannuation
taxation concessions; issues relating to compulsory superannuation
contributions; and several other structural and operational matters relating to
the superannuation system that affect women's retirement income. This chapter
focuses on matters relating to voluntary superannuation contributions,
including how current settings in relation to concessional contribution caps
affect women wishing to make higher voluntary concessional contributions. The
committee also assessed the effect of the government's co-contribution scheme
for low-income earners in relation to women's superannuation balances.
This chapter also discusses voluntary schemes put in place by individual
companies, such as Rice Warner and ANZ, to provide higher superannuation
payments to their female employees. Whereas the previous chapter addressed the
possibility of a mandatory higher superannuation guarantee (SG) rate for all
female employees across the Australian workforce, this chapter explores the
value of voluntary company schemes. In this chapter, the committee also
considers whether there is a need for modest legislative reform to help
facilitate the implementation of similar voluntary schemes in the future.
Concessional contribution caps
At present, the amount of concessional contributions that can be made to
a person's superannuation account is subject to an annual cap of $30,000 for
people aged under 49 years and $35,000 for people aged 49 years or older. The
concessional contributions cap is indexed in line with average weekly ordinary
time earnings (AWOTE), in increments of $5,000 (rounded down).
Some witnesses suggested that the annual caps did not allow for the fact
that many workers have interrupted working careers. Several recommendations for
reform were put to the committee to allow people to make 'catch up' payments,
including a shift to a lifetime concessional contribution cap or a rolling cap
that allowed the unused portion of the annual cap (or a portion thereof) to be
rolled over for use in future years. Because women are more likely than men to
take significant periods of time out of the workforce, it was argued that such
reforms would go some way to closing the gender superannuation gap.
For example, BT Financial Group advocated greater flexibility in
contribution caps, allowing workers to make additional contributions at times
when they could afford to do so. This flexibility would better reflect changing
income levels and expenditure patterns over a person's lifetime, and especially
benefit 'those with broken work patterns such as parents who have taken
extended time out of the workforce to raise children'.
The Association of Financial Advisors (AFA) submitted that current
concessional contribution cap arrangements 'favour those with consistent work
patterns and disadvantage those who take career breaks'. To address this bias,
it recommended that the government consider introducing lifetime concessional
contribution caps for low income earners and individuals with broken careers.
The CBA also recommended that consideration be given to more flexible
contribution caps. It suggested this might be achieved through a three year
averaging rule, enabling individuals to make contributions in excess of the
concessional cap in any given year provided they had not contributed in excess
of the cumulative cap over the prior two year period.
PwC's preferred model was a lifetime concessional contributions cap,
which it argued would better enable some women re-entering the workforce to
make high enough contributions to meet their needs in retirement. It suggested
the lifetime cap should be based on the level of savings required to provide
the average person with a comfortable standard of living in retirement.
ASFA submitted that the annual concessional contribution cap 'can be
overly restrictive for members who are attempting to "catch-up" by
making additional superannuation contributions when their circumstances
ASFA suggested there were several options for improving the capacity of members
to make catch-up payments, including a shift to a lifetime cap on concessional
contributions, or increasing the concessional cap for workers over 50, with the
higher limit potentially restricted to members with a superannuation balance
below a certain level.
ASFA provided an example of how such a policy might be structured and targeted
to benefit women with broken workforce participation patterns:
For example, if you took it up to $45,000 for those over 50
with an account balance of less than $250,000, we think this would have a
significant benefit, particularly for women, and the budget impact would not be
Ms Vamos from ASFA conceded that higher concessional caps would not
benefit low-income earners. However, Ms Vamos maintained that a more flexible
system would help redress the fact that the superannuation system was not in
place throughout the working lives of many women who are now approaching
retirement. She referred to her own experience to illustrate the point:
There are many women today circa my age, because the system
has only been in place for 20-odd years, who were excluded from the
superannuation system. In the last few years—the last 10 years—I have been able
to earn a decent salary. When I started work I was excluded from joining my
superannuation fund and I have not earned enough to put a lot of money into my
super—now I can catch up, and I cannot. There is a strong limit. So it is about
allowing those women, or men, who have been excluded from the system, who have
not been able to participate and who are in their 40s and 50s—maybe their kids
are off their hands and the mortgage is nearly off their hands—to be able to
contribute more. That is why you need to measure the impact on each one. In
particular, what that will do is allow people in their late 40s and 50s to put
in that extra amount. The ability of any government then to pull the levers on
access to free aged care and access to free health care can really start to be
pulled by encouraging those people, who can afford it, to put more money in
while having that cap on.
The National Foundation for Australian Women argued for a system of
rolling contribution caps, which would allow workers to roll over into the
future years the unused part of their cap from periods out of the workforce:
The system of annual caps is not suitable for people who are
in and out of the workforce, as many women are. The proposal we put in our own
paper was a system of rolling caps—I think we said three to five years, which
is about the time a lot of women are out of the workforce between children. I
know there are also proposals for annual caps. I think we would be happy to see
moves along those lines as well. But the point is that annual caps just are not
suitable for women. They are also, I would say, far too generous, in the
context of what I have said previously about misdirected concessions. Most
women who are earning the average wage would not be putting anywhere near
$35,000 into superannuation through salary sacrifice—let us be realistic about
The committee also received evidence from the SMSF Association and
Mercer advocating variations on the concept of rolling contribution caps.
Mercer explained that the problem with current contribution caps is that they
treat superannuation as though it were an annual event, as opposed to a system
for lifetime savings:
I think the concept of this rolling cap makes sense. It
starts to build up the concept that super is a lifetime investment—it is not
this year-on-year decision. I think it is financially feasible. It is a fairer
system, because it is giving everyone the same opportunity irrespective of
It is noteworthy that in October 2015, the Treasurer, the Hon Scott
Morrison MP, flagged the possibility of lifting the taxation cap on
superannuation contributions for people who have breaks from their working
lives to be full-time carers. Mr Morrison raised this idea with particular
reference to helping build the superannuation balances of women taking time out
of the workforce to care for children.
Witnesses broadly agreed that more flexible concessional contribution
caps would for the most part only benefit higher income earners or higher
wealth individuals with the capacity to make contributions in excess of current
caps. On this basis, some witnesses indicated that while they were not opposed
to changes to the caps, they did not consider such reforms a high priority. For
example, AustralianSuper explained that while it agreed some women might
benefit from a shift to lifetime contribution caps, it placed a higher priority
on reforms 'that affect the interests of low-income earners first, and women
are disproportionately represented in that sector'.
Mrs Louise Arnfield, National President of the Finance Sector Union of
Australia (FSU), and herself a part-time finance sector employee on a modest
income and with a relatively small superannuation balance for a 56-year-old,
told the committee that solutions that relied on women putting extra money into
their superannuation accounts would not help women on lower-incomes:
Women who are higher earners can definitely do that, but for
those at the other end of the spectrum there just isn't the money to put there.
It is not a solution at all because we are going from payday to payday. I have
daughters in their 20s who are casual workers trying to get through university.
I am supporting that. That is not an unusual situation in these times. There
are a lot more demands on mature aged women these days. Caring responsibilities,
and the financial impacts of raising your children, go a lot long longer these
days. So there is simply no money left over to put towards super.
Asked about the merits of replacing annual concessional contribution
caps with lifetime caps, HESTA emphasised that few women would ever get
anywhere near the current contribution caps:
We do not think it is a bad thing but we really do not think
it is relevant to our members. I think just under 20 per cent do actually make
additional contributions, which is higher than I think most people would
expect, but they are contributing very low amounts. Our members feel
comfortable making contributions of $20 a week extra—that is the research and
what they have told us. It is nowhere near the limit.
Similarly, the view put to the committee by the SDA, CPSU
and Australian Services Union was essentially that while reforms in this area
were worthy of further consideration, they would only have a modest impact, and
not on those women most in need of assistance.
ISA warned that a shift to a lifetime concessional contribution cap
should be considered with great caution. In addition to the fact that a
lifetime cap would be difficult to administer and police, it would likely only
benefit 'individuals with substantial wealth and income':
Moreover, lifetime caps will not improve women's economic
security, as most women are unable to make any additional voluntary
contributions to their superannuation, let alone the significant additional
contributions required to make up the gap in retirement savings.
ACOSS took a firm view in opposition to proposals to change contribution
caps to allow for 'catch up' contributions:
We believe that into the future, as has been demonstrated in
the past, this would disproportionately, again, benefit higher income male
workers, even though the stated purpose might be to benefit women.
Superannuation should be seen as a system which is designed to deliver the
greatest benefits for long-term savings, not for last-minute catch-up in a
The Grattan Institute was similarly critical of the concept of any
policy changes that increased concessional contribution caps, either through
higher caps or the introduction of rolling or lifetime caps. The Grattan
Institute pointed to analysis it had undertaken showing that less than
5 per cent of median income earners make concessional contributions
of more than $10,000 per year. The current generous concessional caps, it
submitted, were 'predominantly used by older, high-income men to reduce their
The Grattan Institute concluded that:
...providing greater flexibility in accessing generous
superannuation tax breaks is a very expensive way to reduce the gender gap in
retirement incomes because these tax breaks are poorly targeted and could in
fact widen the gender gap in superannuation savings.
Referring to its proposal to limit concessional contributions to $11,000
per year, the Grattan Institute wrote:
For a small proportion of women with higher incomes later in
life, the changes would reduce their catch-up contributions. Yet the changes
would reduce the tax breaks far more for a lot of high-income earners,
particularly men. Low-income earners, and especially women, would need to pay
less in other taxes if super tax breaks for the wealthy were wound back.
The committee was not able to determine with any certainty the number of
women who are making voluntary concessional contributions, as distinct from
simply receiving SG contributions. The ATO advised the committee that it was
difficult to distinguish between voluntary concessional contributions and SG
As such, the ATO was also unable to provide data that provided insight into how
many women might in fact be pushing up against the concessional caps, and who
might therefore benefit from higher or more flexible caps.
As noted above, the committee did not receive any clear evidence on how
many women would be pushing up against the concessional contribution caps in
any given year. The committee considers that the number of women who are
prevented from building adequate retirement savings as a result of current
concessional contribution caps is likely to be relatively small. As a
consequence, reform in this area is unlikely to significantly improve outcomes
in aggregate for Australian women.
Nonetheless, the committee considers that there is a case to be made for
providing women who have had interrupted work patterns—and subsequently wish
make additional contributions—with the capacity to do so. The committee notes
concerns that more flexible concessional contribution caps would be
disproportionately utilised by higher income workers. The committee suggests
that any changes in this direction would need to be designed to ensure they do
not simply exacerbate inequities in the current distribution of superannuation
tax concessions (as discussed in the previous chapter).
Super co-contribution scheme
The superannuation co-contribution scheme is intended to help eligible
low or middle-income earners boost their retirement savings. Under this scheme,
persons who are eligible can make personal after-tax super contributions and
receive a co-contribution from the government of up to $500 per financial year.
The scheme has evolved over time to become less generous than was originally
the case, as AustralianSuper explained in its summary of how the scheme works:
The government currently contributes up to $500 to anyone who
is under the age of 71 and earning less than $50,454 per year but makes a
voluntary contribution from after-tax dollars. The co-contribution scheme has
been in place since 1 July 2003, but has been significantly diminished over
time. It was initially set at a rate of $1.50 for every one dollar contributed,
up to $1,500. Since that time it has been significantly ramped up and then
reined in almost to the point of irrelevance. It is currently a co-contribution
maximum entitlement of $500 for a personal contribution of $1,000.
AustralianSuper, which advocated retaining and developing the scheme,
observed that the number of people accessing the scheme had declined
significantly as the level of contribution from the government had become less
generous. AustralianSuper expressed concern regarding this trend, noting that
the Committee for Economic Development of Australia (CEDA) had provided:
...some evidence that the superannuation co-contribution scheme
has delivered benefits to low income employees and particularly women. CEDA
data showed that 55 per cent of beneficiaries had incomes of less than $30,000,
39 per cent were single, 63 per cent were female and 47 per cent were baby
boomers, the group with the lowest level of superannuation savings relative to
retirement needs. An increased, enhanced, age-specific, gender-specific or
balance-tested co-contribution scheme for low income earners would directly
address low balances of women in retirement.
Mrs Pauline Taylor argued that the value of the co-contribution scheme
had been undermined by the reduction in the maximum value of the government
contribution from $1500 to $500:
Before the latest change, the co-contribution was a strong
incentive to young women to build their super. At one of my seminars, a young
woman of only 19 years proudly announced that she had contributed $1,000 of her
savings to her super and had received the same amount from the Government. This
encouraged her to take an active interest in her superannuation and see it grow
further. Sadly the current $500 co-contribution—requiring a $1,000 voluntary
contribution—does little to motivate young women, who face other demands on
their savings, including rising costs of housing and education.
The AIFS suggested that co-contributions schemes, including the current
scheme, may go some way toward bridging the superannuation savings gap for low
income earners who have taken time out of the workforce. However, AIFS also
noted that participation in the scheme remained low. This suggested 'either
ignorance of the scheme, or a lack of discretionary income available to make
additional superannuation contributions'.
While supportive of retaining the LISC (as discussed in the previous
chapter), the Grattan Institute expressed a general scepticism regarding the
value of other measures aimed at topping up the superannuation balances of low
income earners, including the co-contribution scheme. It argued that:
...measures to boost the retirement incomes of low income
earners delivered through the tax and superannuation systems are inherently
less well targeted than an increase in income support payments as they are directed
at individuals, not households. For example, it is likely that a large number
of people making voluntary post-tax super contributions to obtain the
government co-contribution are in fact the spouses of high-income earners.
The Grattan Institute supported its argument in this regard by pointing
to an analysis it had undertaken suggesting that over 60 per cent of
post-tax contributions made by people with incomes less than $37,000 are in
fact made by individuals with superannuation account balances in excess of
'Super Seed' and other proposals
ISA suggested the super co-contribution scheme had two significant
First, it is a voluntary scheme with a very low take‐up. Only 14 per cent
of income earners eligible for the benefit utilise it. Secondly, since the
proportion of those making non‐concessional
contributions peaks at age 50–54,
the benefits of compounding are very limited.
To overcome these limitations, ISA recommended that the current
co-contribution scheme be replaced with a scheme it called 'Super Seed'. It
described its Super Seed proposal as an 'enhanced version of the government
co-contribution which is targeted to provide an early propagation of
superannuation savings, of most benefit to part‐time
women, especially those taking time out to have children.'
The Super Seed proposal would involve an automatic government contribution
annually to the active superannuation account of persons in the three lowest
income deciles whilst they are aged 27 to 36 inclusive. Noting the need to
further refine its proposed scheme to ensure government contributions were
targeted to those who needed it most, ISA presented modelling on its scheme
based on an indicative figure of an annual $5000 government contribution to
eligible account holders.
The committee considers that the costs and benefits of proposals for the
government directly boosting the superannuation accounts of younger people,
including the ISA's Super Seed scheme, would require additional and careful consideration
before adoption. Proposals to build the superannuation balances of young, low
income people at an early stage in their working lives so that they might
better benefit from the power of compound interest are potentially powerful.
However, such a measure may benefit individuals who later in life may not
require support. More broadly, the committee welcomes the fact that proposals such
as Super Seed help to focus attention on this aspect of superannuation policy,
and stimulate valuable discussion regarding innovative policy approaches.
Employer initiatives—additional super contributions for female employees
The Workplace Gender Equality Agency noted that a number of
organisations are introducing initiatives to reduce the gender retirement savings
gap, and remove barriers for women returning to work.
For example, ANZ and Rice Warner have both introduced packages to reduce gender
pay inequality and increase women's retirement savings. The measures ANZ and
Rice Warner have introduced include superannuation contributions on parental
leave for all employees, additional superannuation contributions to female
employees and access to targeted financial advice.
This part of the chapter considers employer schemes in relation to additional
superannuation payments for female employees. The possibility of a mandatory
higher SG rate for all female employees, as distinct from voluntary schemes
implemented by individual employers, was considered in the previous chapter.
ANZ explained to the committee that, as part of a broader suite of
measures, it had decided to pay female staff an extra $500 per year in
Asked how it had arrived at this figure, ANZ explained:
This is a benchmark of about one per cent on up to $50,000 of
earnings for all female staff. We modelled out that this would mean
approximately $30,000 in additional retirement savings over the lifetime of a
30-year-old woman. That is a start. It is not a perfect answer to close the gap
but it is material and that is how we settled on that number.
Rice Warner reported that it paid its female staff an extra
two per cent superannuation on top of their SG payments, up to a cap
of two times the Adult Average Weekly Ordinary Time Earnings (AWOTE) (about
$155,000). Like ANZ, Rice Warner indicated that it did not believe its measure
would by itself close the superannuation gap, but it would at least be a step
in the right direction.
We did a lot of modelling on the two per cent additional
payment. Longevity is one challenge that women face, in that they live about
three years longer than men, on average. To remove that longevity risk—it is
about 1.5 per cent—and to place men and women, assuming all else is equal, on a
level playing field, we selected two per cent. We wanted to, I guess, help our
female employees. It was a business decision. There is no sort of, 'Two per
cent is going to fix this', and it certainly will not close the gap completely.
They are going to have to do things on their own as well.
Rice Warner informed the committee that the response to the policy from
within the company had been very positive.
Anticipating arguments about the fairness of making higher superannuation
payments to female employees, Mr Rice noted that Rice Warner pays insurance for
all of its staff, and while male insurance was more expensive, 'nobody ever
complains about that'.
Rice Warner also indicated that it was not proposing that extra superannuation
payments for women should be compulsory for all employers.
Rice Warner suggested that as much as directly helping build the
superannuation balances of its female employees, its policy was directed toward
improving the engagement of staff in relation to their superannuation. Mr Rice
I actually think the engagement with our staff is more
valuable, because many of them are now contributing voluntarily. Even well-off
people often do not save well. So if you can get them into the right habits
they would be far better off later in life.
The response from other participants in the inquiry to the voluntary
steps taken by ANZ and Rice Warner was overwhelmingly positive. At the same
time, a number of participants noted that voluntary schemes such as this would
ultimately not deliver the structural change needed to close the retirement
savings gap. For example, ISA observed:
On the issue of additional employer contributions, we would
certainly laud any employer who takes the proactive step of making additional
contributions and we would encourage the removal of any obstacle to them being
able to do that. We do not see it as a structural remedy to the issue, though,
because there are a number of female dominated industries. We do not see the
responsibility for remedying this important issue as one that should fall to
As discussed in the previous chapter, some inquiry participants
suggested that while voluntary initiatives should be applauded, such
initiatives should not deflect from proposals that offer systemic improvements to
improve the retirement outcomes for women.
To implement its abovementioned policy, Rice Warner had to apply to the
Australian Human Rights Commission (AHRC) for an exemption from the Sex
Discrimination Act 1984.
The process of securing the exemption was lengthy and complex, as Rice Warner
We first wrote to the Human Rights Commission in January 2012
seeking a temporary exemption from the Sex Discrimination Act, and this led to
an 18-month period of correspondence and negotiations. We were required to
provide substantial evidence to demonstrate the disadvantages that women face,
including complex modelling.
The final outcome was that, rather than the commission
granting a temporary exemption—which has a time limit of five years and cannot
be challenged in court—it deemed the initiative to be a special measure.
Importantly, a special measure can be challenged in court should a case ever
arise. As a business, Rice Warner decided that the risk was low and that the
benefits of introducing the policy outweighed the risk.
Rice Warner noted that the AHRC was supportive throughout this process.
However, it submitted that the complexity and duration of the process might
discourage other employers from pursuing similar initiatives. The lack of
clarity in the process, Rice Warner observed, was illustrated by the fact that
other organisations who had sought similar exemptions had actually pursued
quite different processes.
Whilst the commission was very supportive throughout the
process, it is our belief that this could act as a barrier for many employers
for the following reasons: the current process is unclear, and it appears that
Rice Warner and the other two organisations I mentioned earlier [Unions NSW and
ANZ] all followed different processes; the drawn out process may act as a
deterrent for other employers; some might believe that the risk around the lack
of certainty for special measures being challenged in court to be too high; and
many would lack the capability to support their application. It is for these
reasons that one of our recommendations in our submission will be to amend the
sex discrimination legislation to ensure that employers who voluntarily choose
to pay their female employees more super are not in breach of the legislation.
Ms Loane from the (Financial Services Council) FSC also noted that Rice
Warner and ANZ had taken different approaches to ensure their additional
superannuation payments to female employees did not breach sex discrimination
laws. Rice Warner had secured approval of a special measures package under
section 7D(1) of the Sex Discrimination Act, whereas ANZ secured an exemption
under NSW law.
Mr Briggs told the committee
An important point to make there, and the reason we pulled
this one out in particular, is around the commission that helped them put
together these packages and get approval. There is no criticism of the
commission; they wanted to help these packages succeed. However, the fact that
the two organisations had to do it in different ways under the same governing
legislation, and passed it differently—the inconsistency—makes it more complex
and acts as a deterrent for organisations who have less to do with the
superannuation sector of getting them over the line. So I think what we are
recommending is either amendments that help streamline the process—so you look
at the legislation and say that this is exactly the path that you have to go
down to get this package approved—or greater consistency in how the legislation
deals with these packages. It removes one of those soft barriers that sit in
legislation that prevent companies from doing the right thing.
The FSU also suggested that amending anti-discrimination laws to allow
for schemes like ANZ's and Rice Warner's was particularly important for smaller
companies who might lack the resources to ensure their schemes were permissible
under current laws. Ms Black noted that while ANZ had been able to negotiate
the implementation of its scheme so that it was compliant. However, she observed
that many smaller organisations may not be in a position to achieve a similar
I think that comparing large banks with other organisations
is not always helpful because they do have access to high-level legal support
when they need it to be able to work out what they need to do to navigate their
way through. So I think some clarity around that to enable smaller organisations
that may not have that same access to legal support would probably be useful.
A number of other inquiry participants also recommended that the Sex
Discrimination Act be amended to remove potential barriers for employers who
wish to pay extra superannuation contributions to female employees.
The committee joins with other inquiry participants in applauding the
steps taken by individual companies such as ANZ and Rice Warner to address the
gender superannuation gap. While such steps are not by themselves sufficient to
close the gap, they are a useful step in the right direction. The committee
particularly welcomes the fact that these initiatives have served to highlight
the issue of the retirement savings gap and stimulate public discussion on this
The committee agrees that modest changes to anti-discrimination
legislation would help clarify the legal standing of such schemes, and
encourage further companies to pursue their own schemes. In particular, the
committee shares the concerns expressed by several inquiry participants that
smaller companies might lack the resources to be able to navigate a very
complex and time consuming legal environment, and might be discouraged from
doing so in the absence of appropriate legislative changes.
The committee recommends that the Australian Government amend the Sex
Discrimination Act 1984 to ensure companies are able to make higher
superannuation payments for their female employees when they wish to do so. As
part of this process the Australian Human Rights Commission should explore
options and advise the Australian Government on appropriate legislative
Following any amendments to the legislation, the Australian Human Rights
Commission should develop guidelines and advice for any organisation
contemplating providing additional superannuation payments for women.
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