Budget 2021: Superannuation’s parent trap not fixed, says industry

The super industry says the Budget missed a big opportunity to fix the ‘motherhood penalty’ many women face.

The superannuation industry has welcomed the federal budget measure to scrap the $450 income threshold for super.

The superannuation industry has welcomed the government’s move to scrap the $450 income threshold for super but has criticised its failure to introduce super payments for parental leave, declaring it “a missed opportunity”.

The $3 trillion sector has also praised the government for not tampering with the superannuation guarantee, paving the way for compulsory contributions to lift to 12 per cent by 2025.

“The one that pleased me more than anything else was the abolition of the $450 threshold,” Hostplus CEO David Elia told The Australian.

“That has huge implications for workers in the hospitality, tourism, sports and recreation industries, who are largely part-time, casual workers.”

The government, in Tuesday’s federal budget, announced it would scrap the $450 a month wage threshold for the super guarantee, bringing a further 300,000 people into the super system, the majority of them women.

Removing the threshold was a step forward that was facilitated by introducing caps on fees to protect against small account balances being eroded, Mr Elia said.

He also pointed to the benefits for workers with more than one part-time job.

“One of the things that often goes unnoticed is that there is a cohort of people who have multiple part-time, casual jobs, who can earn in excess of $450 collectively, on a monthly basis, but still be denied any form of SG contribution.”

The measures announced in the budget would ensure these workers no longer miss out, he said.

HESTA CEO Debbie Blakey also praised the move to scrap the threshold but said it was long overdue and that the super system still had a “gender blind spot”.

“HESTA has been calling for the scrapping of the unfair $450 super threshold for more than 10 years so it’s pleasing the government has taken this long overdue step as it will help improve financial security for women and the lower paid,” Ms Blakey said.

“However, the fact that super continues not to be paid on parental leave remains a glaring gap in our super system.

“For too long Australian women have paid the ‘motherhood penalty’ for the time they take out of the workforce to care for children. More needs to be done to improve their retirement outcomes. Paying super on paid parental leave is an easy and obvious fix.”

HESTA would continue to push for a gender lens to be applied to the economic recovery, she said.

“There is ample global evidence that addressing gender equality and strengthening social and health infrastructure are particularly effective at creating long-term, sustainable economic growth.”

UniSuper CEO Kevin O’Sullivan said the income threshold should have been removed a long time ago.

“To get that out of the way is a good thing. A lot of people in jobs that don’t get paid all that well will now get super, so that’s not a bad thing.”

It would be hard to argue with any of the superannuation policies announced in the budget, including abolishing the work test rule for people from 67 to 74, and lowering the age at which people can put up to $300,000 into their super after selling the family home, he said.

While some funds would benefit more than others from the changes, such as those that had a lot of members who were part-time workers, the measures wouldn’t have a significant impact on the broader industry, according to Mr O’Sullivan.

Aware Super CEO Deanne Stewart said the budget measures had failed to address the structural barriers that see many women retire in poverty.

”There was little in this budget to provide older, vulnerable women with long-term financial security or to protect women taking time out of the workforce to care for family by paying the superannuation guarantee on paid family leave.”

“The budget has delivered a little bit of something for everyone, but hasn’t landed the knockout blow to eradicate gender inequality and disadvantage in this country. It is a promising first step but there is plenty more work to do,” she said.

Ms Stewart also praised the government’s commitment to leave the super guarantee alone, a sentiment echoed by Mr Elia.

“The government needs to be congratulated on the commitment to the ongoing super guarantee increases,” he said.

“It also needs to be congratulated on not undermining the preservation rules that underpin the success of the superannuation system. By that, I mean not allowing any form of ongoing early access above and beyond hardship related claims.”

Hostplus, the industry fund for the hospitality sector, saw more than $3bn flow out from its fund as members took advantage of the early super access scheme that ran from April to December last year.

“Re-emphasising the purpose of super by not tinkering with the preservation rules ought to be warmly congratulated and is a welcome (move),” Mr Elia said.

ASX-listed investments and annuities provider Challenger joined those praising Tuesday’s budget.

“Challenger welcomes the budget, and in particular the superannuation measures that will boost retirees incomes and improve outcomes for older Australians,” Challenger managing director and CEO Richard Howes said.

Contained within the budget papers was a move to allow investors trapped in legacy retirement products to exit the schemes over a two-year period.

The measures include allowing investors to exit market-linked, life-expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.

It only applies to schemes entered into before September 2007.

Credit Suisse said the move to allow investors to exit the products would likely have a limited impact on annuities provider Challenger.

“These measures are designed to promote efficiency and reduce costs in the superannuation system,” the analysts told clients.

“Most of Challenger’s lifetime products were written after the 2007 cut off date, with Challenger launching its lifetime annuity product around 2012. We note it may have a small amount of legacy products possibly acquired. This should mean any impact on Challenger will be negligible,” they said.

Originally published as Budget 2021: Superannuation’s parent trap not fixed, says industry