The tax treatment of superannuation is a disgrace and particularly disadvantages women because they tend to be on lower incomes, former deputy chair of the Periodic Report Group, economist Susan St John told a meeting of women superannuation specialists.
"Anyone earning under $38,000 – and women’s incomes by and large are going to place them in this category – is effectively paying a 50% tax penalty on their employer’s contributions to super schemes as well as on dividend earnings in the fund," she told a meeting of Women in Super in Auckland.
"Even in the older age groups, where the last shot at saving for one’s retirement can occur, far fewer women than men will have incomes over $38,000. For these women, some freed at last from family demands and looking to make up for lost time, the tax regime for superannuation is disastrous."
St John said it had been recognised since the tax cuts of 1996 that people paying a 21% tax rate were penalised by the tax regime for superannuation. However, successive governments had put it in the too-hard basket since the options put forward by the Taxation of Life Insurance and Superannuation committee (TOLIS) had failed.
She says New Zealand women were fortunate in having a pension like NZ Superannuation, which did not rely on a contributions record and was not referenced to a partner’s earnings. But women were more vulnerable than men to cost pressures on NZ Superannuation.
"More than 70% of women aged 65 or over receive at least three quarters of their income from NZ Superannuation, compared to just over half of men. Around two in five women have no other income. When you consider that the living alone rate amounts to only $11,700 net a year, it does not require much imagination to see the restricted lifestyle this now affords.
"The rest of the developed world is having a really intense debate about their retirement income systems. As a recent article in The Economist pointed out, the reforms that are proceeding rapidly are largely all emphasising the increased role of private pension provision.
"Our history shows us unilateral imposed decisions do not work. We need a reinstatement of the multi-party process and, once that is convened, women’s voice must be heard with urgent resolution of the tax issue," St John says.
This is a press release from Women In Super
Women in Super (Wahine Whakamoamoa) was set up to promote the specific issues relating to women and superannuation. It also aims to increase the number of women in decision-making positions within the industry and to promote education and training. Women in Super holds regular meetings in both Auckland and Wellington.
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