Why women in distress should be given early access to their super
The statistics are damning when it comes to women and super.
They retire with 47% less super than men and a third retire in poverty. There are many reasons for this dismal outcome: the pay gap (women working full time earn 18% less than men) and women also have interrupted careers and broken work patterns thanks to bearing and raising children.
The situation is more grim for older single women: 40% live in poverty and experience economic insecurity in retirement; 8.5% of those aged between 65 and 74 still have a mortgage.
For some women, more dire matters are at stake, like life and death itself, with an average of one woman killed in Australia each week by her partner or ex-partner.
Late last year Kelly O'Dwyer, the Minister for Women, launched a package of initiatives to address the gender pay gap and improve women's economic recovery following life-changing events such as separation or domestic violence. It was delivered after considerable consultation with a number of stakeholders.
One of the proposals is to extend the early release of super to victims of domestic violence on compassionate grounds. The move has been welcomed by the super industry's umbrella body, the Association of Superannuation Funds of Australia.
Industry fund HESTA also supports the proposal.
"It will provide a vital financial lifeline to those seeking safety from violence and abuse," says CEO Debby Blakey. "Given the heartbreaking prevalence of family violence in Australia, it is appropriate early access to super has been extended to victims and survivors.
"We see first-hand the desperation of members in financial distress. Victims of family violence are often met with inconsistent and inadequate crisis funding. Women often escape a violent situation with limited assets and serious debt, as financial abuse is almost always present where there is family violence."
Victims of domestic violence will be allowed to access their super, from $1000 up to a cap of $10,000, over a 24-month period. The funds will supplement existing government and non-government schemes that support victims of domestic violence.
Existing grounds for early release include medical treatment for a life-threatening illness or injury, palliative care, mortgage arrears and expenses associated with a death. If you are under age 60 the funds are taxed at between 17% and 22%.
Peter Foley, a certified financial planner and director of advisory firm Thirdview, says the proposal still has a fair way to go before it passes into legislation.
"Domestic violence is obviously a traumatic time on a number of levels so there's some consideration that compassionate grounds should be extended in these circumstances."
The Australian tax office administers the claims for early release of super on compassionate grounds. Any claim will likely need to be supported by documentation, such as a family violence order or declarations from support workers like police or doctors, says Foley.
"It's not the super fund trustees' decision. The ATO will be the arbiter of that. The tax office will give the direction to the trustee whether or not to release the funds. Once the ATO gives the green light, the trustee must follow suit.
"It's a new regime. The ATO has just taken over these decisions. They've been given the powers, so the trustees are now forced to fall in line with the decision."
Stakeholders were divided on early release, with some arguing against it, as it would lead to greater financial insecurity in retirement. However, the proposal recognised that early release due to hardship outweighed the benefits of preservation of savings until retirement.
Foley believes the government needs to play a bigger role in extending some form of emergency funding and accommodation for victims.
"We can have a better outcome if government is willing to step up on this and provide some funding in these circumstances and protect a victim's long-term ability to fund their own retirement, or at least partially."
Blakey would like to see the proposal include some improvements: that victims be able to seek compensation from perpetrators to top up their super; that early access does not impact any social security benefits; and that the funds released not carry an extra tax burden.
"The formulation and implementation of these changes needs broad consultation with expert family violence service providers and does not negate the need for government to adequately fund services," she says.
For more information, go to ato.gov.au and search for "early access to your super".