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Workers, women & superannuation

Greg Combet & Diana Olsberg

Reaffirming the role of unions

Greg Combet

Introduction Bill Kelty's passion for superannuation, and the efforts he and others made towards achieving the system we have today, cannot be overstated, and I am sure that he will continue to contribute through his membership of the board of ARF. The ACTU is as committed to superannuation today as it has ever been. Unions directly represent nearly 2 million union members, all of whom have an interest in the adequacy and safety of their retirement incomes. With this in mind, the ACTU and unions have an interest in ensuring that superannuation funds fulfil their prudential responsibilities, including by seeking strong returns balanced by appropriate risk, and by ensuring that administration and investment costs are as low as possible consistent with professional levels of service.

Adequacy Taking this basis as our starting point, the ACTU is concerned to address a number of key issues. The first is the question of adequacy - it is well-established, that 9 per cent, which will be reached through the Superannuation Guarantee in July this year, is not sufficient to ensure reasonable living standards in retirement. Irrespective of which government is in Canberra, options need to be developed about increasing contributions - whether through the taxation system, direct employer contributions, member co-contributions or a combination.

Attacks on trustees The second issue is the attack being waged on the trustee system, and industry funds in particular, by the federal government. Crude attempts to link the failure of some small funds, none of which had union representation, or effective employee representation for that matter, to industry funds and union-nominated trustees, demonstrates clearly what the government is on about. The government's objective is to shift superannuation from the non-profit, jointly run superannuation system to the retail funds and master trusts operated by its mates in the banking and insurance industries. The policies with which the government went to the election, with a couple of exceptions, like requiring quarterly payment of contributions, are largely directed to helping those best off, and encouraging money into retail funds.

Super and IR: the connection? First of all, let me make it absolutely clear to anyone who hasn't been listening for the last 15 years, the ACTU has not, does not and will never support union-appointed trustees, or any other trustees, jeopardising members' retirement incomes by making investment decisions based on considerations other than the interest of those members.

Unions do not instruct trustees how to invest members' funds, as those in the industry well know. The evidence that this does not occur can be seen in two key features of our system. The first is that a two-thirds majority is required for trustee boards to make a decision, and in most cases, decisions are made by consensus. The second is that industry superannuation funds do not generally make decisions about investing in particular stocks: almost universally, this is delegated to funds managers. In practice, it is simply unmanageable for fund boards to make these kinds of decisions.

This is not to say that issues like good labour relations are irrelevant to superannuation investment. They are not. Just as we have seen evidence that sustainable environmental policies, and concerns for the human rights of the communities in which they operate, are linked to long-term performance, it is increasingly demonstrable that good labour relations are linked to performance. A US study has found that the average unionised establishment that adopted high performance management techniques recorded productivity increases ... twice the gain recorded by the non-union establishment adopting the same techniques.

I think it is reasonable for funds managers, particularly those who do in-depth qualitative analysis of companies, to look at the types of relationships companies have with their employees, and ask some of these questions.Is the company committed to observing core ILO standards on child labour, forced labour, non-discrimination, collective bargaining and freedom of association? Does the company, in practice, behave consistently with the ILO standards? For example, if a company uses agents in Asia who exploit child labour, or if it forces individual contracts on employees who want to bargain collectively, even though the latter is legal in Australia, there are issues which are relevant to investment.

A range of surveys have shown significant support amongst investors and superannuation fund managers for socially responsible investment policies. Some funds have responded by offering so-called "ethical" funds as part of member investment choice.

Active engagement Another strategy is one of 'active engagement', or shareholder involvement with a company, whether informally or through proxy voting, in an attempt to improve company management and performance. The concept of active engagement has won widespread support, including from the Blair government in the UK, and from both sides of the political spectrum in Australia.

The support of unions for observance of labour standards and improved corporate governance is not complicated. One reason is to protect and improve the working life of employees. But like the groups mentioned above, unions are also interested in good corporate governance because it is an essential component of good performance. And better performance means better returns for the beneficiaries of superannuation funds.

At the present time, activism of this type is generally related to issues like executive remuneration, board composition and overall management effectiveness. It is inevitable, however, that issues like environmental and social sustainability, in which I place labour relations, will become more important. It is certainly an issue gaining greater attention overseas.

While I don't see unions trying to exert influence through trustees, I do support campaigns like that of the CFMEU a couple of years ago, which was aimed at convincing shareholders of Rio Tinto to support a greater number of independent directors on the board, and a commitment by the company to ILO labour standards. The resolutions received about 20 per cent of votes cast, which was considered pretty extraordinary for a first attempt, but what was really interesting was that very little of that support came from industry funds. Overwhelmingly, the votes came from funds managers and institutional investors who looked at the issues on their merits and supported them. It should also be noted that the campaign succeeded in another way: not long afterwards, Rio Tinto sat down with unions for the first time in some years and, as you may have seen, has been gradually rebuilding its relationships with the ACTU and unions.

Good IR helps performance To sum up, I believe that unions have a right and a responsibility to make their case about the links between performance and good industrial relations, and that investors should consider these arguments on their merits, in the context of their legal obligations. Obviously, the demand for socially responsible investment, and the Financial Services Reform Act requirement in relation to disclosure of considerations (including labour relations), will also help to put these issues on the agenda. I think that is a good thing, and I suspect the community in general, including our fund members, would agree.

Women and retirement savings: ways forward? Lessons from overseas initiatives & Australian strategies

Diana Olsberg

Introduction Through no fault of their own, but in response to the demands of society, Australian women have less accumulated retirement savings than men. On current savings trends, only a small minority of women will be able to confidently look forward to a comfortable, financially independent retirement lifestyle. It appears that our current superannuation system is likely to fail in its task of providing adequate retirement incomes for many women. Can anything be done to improve the situation?

The problem requires concentrated efforts on the part of policy decision-makers in governments, in the financial services sector, by superannuation funds, by employers and through action by women themselves. I want to highlight what I see as the most possible. We can have grand ideas about what we might like to see happen but it is important to focus on what is possible in legislative and policy terms, and what is administratively feasible and likely to be successful with the general public.

I shall focus upon four strategies: first, gaining greater equity for women in the paid workforce; secondly, enhancing education and incentives to save, education about savings, about superannuation and about investment; thirdly, assisting women to maximise what superannuation savings they do have; and thirdly, providing an increasing role for women in the corporate governance of Australia's superannuation and retirement income system.

Greater equity for women in the paid workforce Essentially superannuation is not a retirement issue. It is a workplace issue. The system of superannuation is an occupation-linked system, and women's accumulation of superannuation benefits is intrinsically connected to their lifetime income in the paid workforce. People constantly invite me to talk at conferences about the elderly and about retirement, but I want to be speaking about these issues at conferences of young people and in discussions about workplace issues. This is because essentially the best way in which we can address women's continuing disadvantage is through workplace reforms - through assisting women to stay longer in the paid workforce; and by ensuring that women are paid equitably, have access to career development despite broken patterns of paid work, and that - if necessary - they are able to continue working past normal retirement age. We must also assist women who are out of the paid workforce, shouldering responsibilities for children and grandchildren and caring for the sick and the elderly. These women must not continue to be disadvantaged even unto old age by their absence from the paid workforce.

At present, it is very difficult to combine family responsibilities with paid work. Most women who try to do so find it an exhausting task. In some other countries, female workforce participation is much higher than that recorded in Australia, because these nations make it much easier for women to combine motherhood with paid work.

In Australia, we must ensure that workplaces adopt 'family-friendly' policies, such as flexible working hours, part time work, job sharing, home based work, career breaks, leave for people who need to care for family members, paid maternity and paternity leave. The introduction of family friendly policies will lead to an increase in female workforce participation, which will be good for employers as well as for women and will result in women accumulating much more adequate superannuation savings.

At the very least, women should be entitled to continuing Superannuation Guarantee contributions from their employers while they are on maternity leave. This will give them continuity of savings despite broken periods of employment.

And what about women who are out of the paid workforce caring for others. In some countries, the social security system already recognises the contributions of women in caring for young children and the disabled, by giving age pensions credit for carers. It is difficult to see how Australia's superannuation system could be changed to give explicit recognition to the contribution made by women caring for others - this is one of the drawbacks of our privately run system.

There are 1,306,200 female carers in Australia, 317,000 of these women are primary carers. But only 57,190 carers are receiving a government-provided Carer's Payment (only 0.3 per cent of Australia's population). A majority of those are women. Immediate SGC contributions, paid by the government and additional to the Carer Payment, could provide a means of rewarding caring services. Or perhaps, a system of credit bonuses could be developed. A credit bonus scheme would allow people out of the workforce caring for others to accrue additions on a pro-rata basis to top-up their age pension. For example, someone who spent their entire working life performing necessary (but unpaid) work would have some additional entitlements when they receive the age pension.

Family responsibilities affect women and men too across the lifecourse. Women and men of all ages must be educated about the importance of retirement savings, be given information which is understandable. And they must be encouraged to save.

Education and incentives to save How can we convince women and men to save save save in a media saturated culture when billions of advertising dollars tells them to spend spend spend. An extensive consumer education program is required. The future welfare of the entire Australian community is at stake - those heading for retirement, and for younger Australians in the workforce who will be hard pressed paying taxes to provide health and welfare services for the elderly. This situation is at least as important and warrants the same amounts of expenditure as introduction of the GST and the Republic Referendum.

Education campaigns focusing on financial choices or decision-making cannot be universally appropriate, relevant or effective. Smiling suntanned silver-haired couples enjoying houses at the beach and overseas holidays are just not the norm. Education campaigns and retirement planning seminars should be targeted at people with varying amounts of superannuation benefits and total retirement savings, with different occupational backgrounds and personal circumstances, and different levels of financial expertise. Creative programs that are culturally diverse and appropriate for people with different levels of financial awareness and language skills must be developed. There is a need to create an understanding and appreciation of the relative and intrinsic importance of savings. The special needs of non-English speaking women must be addressed in education programs, including information and advertising messages in community languages. Use of community television, radio stations and press is particularly relevant. Let us not be seduced by the simplicity and slickness of national, one-off television advertising campaigns.

Such education campaigns can be led and co-ordinated by government with the involvement of financial services providers, particularly superannuation funds, employers and community organisations. Longer-term school programs must be developed to teach young women and men basic principles of investment and to create a savings culture.

In the United States much attention is given to encouraging savings. Government and employers take an active role in promoting the advantages of retirement savings and distributing material to their employees. In 1998 the US Congress passed the SAVER Act (Savings are Vital to Everyone's Retirement). The SAVER Act initiated a series of National Summits on Retirement Savings to develop a bipartisan approach to savings education. The US Department of Labor works in partnership with the Department of the Treasury, and with 65 public and private organisations. The campaign has targeted three groups who traditionally display lower participation in pension plans - women, minority groups and small businesses.

The activities specifically directed at women include: Preparing brochures on various retirement issues for women (including rights on a share of the retirement savings on divorce); Sponsoring conferences that aim to educate women about financial issues at the grassroots level; Producing articles for newspapers, recordings for radio and videos for television, which are specifically targeted at women (also produced in Spanish); Running a website and a hotline for enquiries; Providing a simple financial planning tool - the 'Ballpark Estimate'.

As an example, they advertise their brochures to readers of 'Dear Abby' - a highly popular personal advice column published in hundreds of newspapers across the country. Some of their ideas are quite innovative: for example, each year they grant the Oseola McCarty Super Savers Award recognising low income wage earners who have successfully saved a large amount of money.

Incentives to save: increasing compulsory or voluntary contributions Despite much discussion about the probable inadequacy of the 9 per cent compulsory Superannuation Guarantee Contribution by employers, on current indications there will be strong opposition from the government and employers to further compulsory increases in contributions. Is it possible therefore to take steps to increase voluntary contributions? Voluntary savings should be encouraged and taxation should be designed to provide a clear incentive to save.

One of the most significant disincentives is the distrust many people feel towards the government. There is a perception that the rules have changed too often and that the government might easily decide to increase taxes on superannuation again, the next time the Treasurer needs to fill a hole in the budget.

People tend to save more if they are given financial incentives to do so. These incentives may be provided by government or by employers. Certainly, taxation incentives are essential to encourage women to sacrifice current spending in order to put money away for preservation until retirement - savings that cannot be accessed for family or household contingencies such as house mortgages, health or children's needs.

In 1995, the then federal Labor government proposed a policy designed to increase retirement savings. Employees would be encouraged to pay up to 3 per cent in voluntary contributions and the government would provide a co-contribution to match. The benefit would be income-tested, so that people on low-incomes would gain the greatest benefit with a 100 per cent match. The co-contribution would be phased out for those on higher incomes. This plan was never implemented, as Labor has lost power. However, the same policy may be reconsidered if the Opposition wins the next election.

Other countries have also considered and introduced government co-contributions targeted at individuals on low incomes and those with family commitments. In Germany, the government has recently introduced a co-contribution for voluntary pension contributions. Germany's experiment provides tax benefits and direct subsidies. And in the United States, former US Vice President Al Gore offered a different proposal, specifically aimed at encouraging voluntary contributions from low and middle-income earners. With these proposals as possible models, the option of a co-contribution by government in place of promised tax cuts must be considered.

Employers in the United States are also pro-active in offering inducements to employees for voluntary contributions to retirement savings. Extra employer contributions are often negotiated as part of profit-sharing arrangements. When the company does well, a percentage of profits will be directed into the pension fund. These arrangements are negotiated between the union and the employer.

A more novel employer strategy is The SmartT Program for procrastinators - the 'Save More Tomorrow' program . Most people know that they should be making higher contributions - but they put off making a definite decision to do so. This month is too difficult - the house insurance is due, the electricity bill was too high and the children need new clothes. Tomorrow always seems to be a better date to start saving - but tomorrow never comes!

So far, we have considered ways to increase the amount flowing into superannuation funds. But of course final benefits would increase considerably if we could only persuade the government to reduce the amount of tax that is taken out.

Most employees are eligible for 9 per cent SG contributions - but the government immediately takes 15 per cent of this amount in contribution taxes - or even more if the worker falls into the surcharge net. Therefore, the net contribution is only 7.65 per cent of salary, at best. ASFA estimates that this contributions tax amounts to about $2.5 billion.

At the very least, the first 15 per cent contributions tax on superannuation contributions paid into a person's fund should be concessionally taxed - or even eliminated altogether - for those with below average incomes. A large proportion of Australians who would benefit from such a tax reduction would be women. Thenceforth, they would have more money accumulating long-term returns in their superannuation accounts.

This tax change would cost the government about $2.5 billion, which is approximately equal to a $6 per week tax cut for someone on Average Weekly Earnings. Public opinion surveys suggest that most Australians are concerned about the adequacy of their retirement savings and would prefer a reduction in superannuation taxes, instead of a reduction in income taxes.

Assisting women to maximise what savings they do have Women have lower amounts of superannuation than men, but there are possibilities for women to maximise their existing savings. The need for access for women to leading edge, financial investment consultation and information must be recognised as an important issue - pre and post retirement. This is essential if women are to enhance the effectiveness of their economic decision-making.

Major banking, investment houses and funds managers must be encouraged to develop products which are suitable and offer maximum investment opportunities for people with savings that fluctuate across the life course, for which there are occasional breaks in contributions, and for people who have lesser amounts of money to invest. People who have broken periods of savings, but who wish to have continuity in savings products, must be catered for. Most of these people will be women - emphasising the pressing need for 'women-aware' roducts. As the amount which women have saved increases, product and investment service providers who do respond to women' special needs will be richly rewarded. Education programs offered by organisations such as the Australian Stock Exchange (ASX) could also ensure that greater attention is given to investment options for individuals with small accounts.

Clearly too, there is a pressing need for new financial products to assist Australians in managing their finances when they reach retirement. As people are living longer,it is important that post retirement products be developed which provide growth opportunities and encourage pension stream options. We ave raised some options which are offered overseas and could be adapted for Australia.

Women report they frequently have problems getting good financial planning advice:

  • financial planning advice is expensive;

  • financial planners are mostly male and usually work with male savings projection models;

As a result, they do not take account of women's different employment patterns, career profiles or lower availability of surplus income.

Finding a good planner is difficult: first, some planners simply don't know enough to provide sound advice; secondly, some planners seem not to be working in the best interest of the clients. Women comment they have concerns that some advisers may be:

  • Recommending the product with the highest commission, even though it may not be suitable for the client;

  • 'Churning' investments (i.e. encouraging people to switch from one product to another in order to generate additional commissions);

  • Many financial planners work for financial institutions and this will naturally influence their recommendations;

  • Financial planners are not prepared to provide advice for people with low amounts of savings or to develop 'no-frills' but effective savings plans;

  • It is very difficult to find female financial planners.

Increasing women's role in governance Almost 90 per cent of women in the paid workforce have superannuation, but the role of women in the governance of Australia's superannuation system is very low. While the growth of superannuation as a new industry sector has provided opportunities for many women in superannuation fund administration and investment, little increase has been recorded in the numbers of women representing employers and employee members as trustees of superannuation funds. In some national funds (some with a majority of female members), there are no female trustees or, at best, one or two women sitting on boards of ten. Back in 1991, less than 10 per cent of trustees were women. By 1995 the percentage had risen to 14 per cent (Olsberg, 1997). A recent ASFA survey of 87 major funds with 663 trustees indicated that female representation had risen to only 18 per cent (ASFA, 2001).

It is important to have a broader representation of women in decision-making positions across all sectors of superannuation, but particularly on the trustee boards of the funds that have particular member-focussed responsibilities.

Women are actually needed in the system. Female managers are better able to reconcile the dynamic tensions of change in organisations that are impeded by tradition-bound inertia.

It is therefore important that strategies be developed to provide women with the opportunities to gain a greater say in the processes of evolutionary change taking place in Australia's superannuation and retirement savings system. Women must increase their representation on the trustee boards and management committees of superannuation funds. They must also take a leading role in policy-making processes on any forthcoming review and reform of Australia's national superannuation and retirement savings and income system. These are rights, and it is not so much for women to argue for their provision, as for men to justify their continued denial.

Finally I want to acknowledge and thank all those organisations, including of course the NRMA Insurance Group, who are actively participating in the Policy Summit. Most particularly I want to say how encouraged I am that so many people in government, in the financial services industry and in community organisations think that this is such an important issue and want to do something about it. I would like to particularly thank the University's Deputy Vice Chancellor, Professor John Ingleson. It is largely through Professor Ingleson's support and encouragement that we managed to get the Research Centre on Ageing and Retirement established at the University.


Greg Combet is the Secretary of the Australian Council of Trade Unions (ACTU) and a Member of the Board of the Superannuation Trust of Australia (STA). This article is based on his speech to the Conference of Major Superannuation Funds(CMSF) in March this year. Diana Olsberg is an economic sociologist and the Director of the University of New South Wales Research Centre on Ageing & Retirement (RCAR) and the author of Ageing and Money: Australia's Retirement Revolution (Allen & Unwin: Sydney, 1997).


Suggested citation

Olsberg, Greg Combet & Diana, 'Workers, women & superannuation', Evatt Journal, Vol. 2, No. 4, June 2002.<>

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