Double rate of concessional contributions for mums

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One of the big inequalities that Australian superannuation still has is how under-saved women are compared to men, according to AFA CEO Brad Fox. This is predominantly down to two factors; the average wage of women being lower, and taking time out of the workforce to raise children.

The Institute of Public Accountants has tried to address this issue by calling for twice the rate of concessional contributions for carers, where they have been out of the workforce for more than 18 months.

“Carers basically provide a low-cost solution to government as unpaid service providers; their service should be valued, not penalised,” said IPA chief executive officer, Andrew Conway.

“Policies that ensure carers have adequate superannuation balances on retirement are essential.”

Brad Fox isn't so sure about this approach and says the answer is simplification.

“What happens when halfway through that, or after 12 months, the caring for someone weighs you down so much that some of your family step in and gives you a six-week break – does that start the count again?

“Keep the broad rules simple. Make them easy to understand and make it attractive for people to use them to maximise their own retirement savings.”

He says advisers can encourage couples to move across 85% of their eligible earnings from the provider to the carer at the end of the financial year, but this is merely splitting the pie, rather than adding more money to super.

“If there’s anything that male or female can do, is to make sure that in their earlier adult years, they do contribute extra to super, because the multiplying effect over time for that will help extraordinarily in retirement.”

  • Innocent Observer on 4/04/2013 3:22:48 PM

    @IR - we (or the govt, on the nation's behalf) must weigh up the net cost costs & benefits of providing incentives/subsidies etc to boost retirement savings, versus the potential welfare savings. For example, if it costs us (the taxpayer/govt) $50k to boost a retirees savings by $100k it's not good enough to interpret that as a $50k benefit. In fact, what it equates to is a reduction in welfare of perhaps $3.6k p.a. But then again, that $100k could be spent by the retiree (on a new car, holidays, at the casino etc) and we (the taxpayer funding the liability) are back at square one, funding the full rate of pension once again. Also we must consider the opportunity cost of lost revenues (i.e., the $50k it cost us, the taxpayer, to boost the retirement balance). Where does this money come from? What alternative use does it serve? ...the most simple comparison would be to compare the outcome were these $$ used to repay federal debt. Encourage people to fund their own retirement: yes. Providing a free handout is reckless and irresponsible

  • Pat on 4/04/2013 2:14:20 PM

    Can someone explain the proposal in this article to this simpleton?

    Paying twice the rate of concessional contributions - what concessional contributions?

    I have no idea what Brad Fox is referring to in this article.

  • Independence Required on 4/04/2013 1:28:38 PM

    The burden on the government welfare system due to the ageing population needs to be countered by superannuation funded independence in the future. Superannuation systems need to address future needs and encourage appopriate investments and increased savings. This recommendation to ensure Carers are catered for means spend now to avoid significant govenment funding requirements in the future; funding that comes direct from the tax payer.

  • Innocent Observer on 4/04/2013 9:49:50 AM

    While no one is disputing the value that stay at home parents (a role many fathers are taking), I think it's a valid question to ask whether it is business or government's role to provide an additional subsidy to boost the retirement savings of those who have been out of the workforce for some time (say, 18 months).

    As an employer I'm not sure I'd be jumping at the chance to pay these new employees 10% more than similarly qualified candidates. And I'm sure they would be less than keen to see their gross wage reduced because the govt. reckon that their super is more important than providing for their family's day to day expenses.

    At the end of the day it is not the govt's responsibility to ensure that everyone has $X at retirement. We have an excellent welfare system to help unfunded retirees, and families who opt out of the workforce to take care of their families

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