Australians being ‘ripped off’ up to $1.3b a year with superannuation flaw

Australians are being “ripped off” when it comes to their retirement to the tune of billions and a simple move could tackle the “financial blow”.

A whopping $1.3 billion in superannuation has been “deprived” from Australians in just one year due to a fatal flaw in the system, shocking new analysis has revealed.

It showed about one million Australian women have been “ripped off” by not receiving the superannuation entitlements they are owed as employers are only required to pay them quarterly.

The analysis from Industry Super Australia (ISA) of 2019-20 tax files found that one in five women are underpaid super and those working in industries like childcare, aged care, hospitality and personal services were particularly hard hit.

About a quarter of female workers in those industries suffered super underpayments, costing them up to $40,000 from their retirement nest egg, which for some is the equivalent of almost 10 per cent of their savings.

Overall, the “swindle” has cost women a staggering $10.8 billion over seven years.

$1.3b in super is missing from women’s funds each year due to underpayments. Picture: Supplied

Younger women on lower incomes are one of the worst impacted – with almost 40 per cent of women in their 20s earning less than $25,000, which means on average this cohort missed out on $570 a year.

Meanwhile, one in four women under 40 have been ripped off.

A 1990s law that allows super to be paid quarterly is contributing to the unpaid super scourge, according to ISA.

It said switching to contributing to super on payday would increase retirement savings for the 4.2 million workers whose super guarantee was currently paid quarterly.

The change could result in a 30-year-old earning the median wage be up to $8000 better off at retirement if paid super fortnightly instead of quarterly, because contributions would compound for longer if paid more frequently.

Industry Super Australia advocacy director Georgia Brumby. Picture: Supplied

Industry Super Australia advocacy director Georgia Brumby said unpaid super is depriving one million women a year the chance to save for a financially secure future

“It is a crushing financial blow that many women – who are still retiring with a third less super than men – won’t recover from and can wipe out 10 per cent of their savings,” she said.

“Aligning payment of super and wages is the right thing to do by workers, boosts government revenue, lifts investment returns and puts all employers on a level playing field.”

“Paying super on payday will help women claw back more super now, while the government is unable to commit to other equity measures like paying super on paid parental leave.”

Earlier this month, the federal government rejected a move by the Greens to get superannuation paid on the government’s parental leave scheme.

But modernising the law so that super is paid on payday will make it easier for workers to keep track of payments – drastically reducing the prevalence of unpaid super, according to ISA.

Women nearing retirement have about a third less super than men, are more likely to have broken career patterns and earn less than men. Picture: iStock

It said some businesses are tempted to use employees’ super to manage cashflow only to accumulate large super liabilities they later can’t meet, while the payday solution could reduce unpaid super by at least 15 per cent, ISA estimates.

It also showed how much unpaid super could impact people in different fields. For those working in aged care, they would be left with $35,200 less in their retirement savings on average, while childcare staff would miss out on $34,700.

Enrolled nurses would be most badly impacted by unpaid super with $43,900 missing from their retirement pot, while a personal assistant would be short by $37,400.

Enrolled nurses would be most badly impacted by unpaid super with $43,900 missing from their retirement pot. Picture: iStock

A hospitality worker who isn’t paid their superannuation would find they had $28,600 less at retirement, while it jumps to $29,300 for sales assistants.

“As payday super is cost neutral to the federal budget, it can be quickly enacted to allow thousands more women to get the vital early super contributions needed to build a financially secure retirement, while the government secures the funding for other gender super equity measure like paying super on parental leave,” ISA added.

Recent Australian Australian Taxation Office estimates showed Australian workers missed out on $3.4 billion in unpaid super in 2019-20