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Tuesday, May 17, 2022

As retirement nears for many and financial security slips away, the Govt sits on its hands

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After a life dedicated to hard work and selfless care, the very least aged care workers deserve is a comfortable retirement.

But with a small yet vital piece of legislation left on the back-burner, thousands of age care workers may see their futures looking less prosperous and more uncertain with each passing day.

In a proposed amendment to treasury laws, a rule preventing entitlement to super payments on incomes of $450 or less per month from a single employer will be scrapped.

It is an archaic rule that the Government says was originally instated to reduce the “administrative burden” for businesses dealing with small amounts of superannuation contributions.

But the Government now admits that this policy disadvantages an estimated 300,000 Australian workers, who are losing up to $567 per annum in superannuation entitlements.

Primarily, these people are young, low-income, part-time or casual workers.

Sixty-three per cent of this cohort are female.

Whilst there is no specific data signalling just how many of these affected workers belong to aged care or other healthcare settings, we know that such workers are certainly at risk.

…the Government now admits that [an archaic rule] disadvantages an estimated 300,000 Australian workers, who are losing up to $567 per annum in superannuation entitlements. Primarily, these people are young, low-income, part-time or casual workers – 63 per cent of whom are female.

And whilst the immediate shortcoming is just a few hundred dollars a year, as the years pass, and as retirement nears, many workers are at risk of financial security totally slipping away; some will face homelessness.

Scarce hours prevents aged care workers from accumulating decent super

Health department data shows that only 10 per cent of workers within residential aged care have secured full-time contacts.

Therefore, supplementing one’s income through additional jobs is all too common – and even the pandemic hasn’t put a stop to the trend.

A September report from the Australian Council of Trade Unions (ACTU) notes that multiple job holding in health care and social assistance roles surged by 35 per cent from June 2020-21.

It is unclear as to whether any of these additional roles would fall within the current superannuation exemption policies, but the likelihood increases for aged care workers juggling multiple jobs.

“Many aged care workers must work multiple jobs because they cannot get the pay or hours of work at one facility or even two facilities,” the report reads.

“In the pandemic, some aged care workers had up to four jobs to try and get enough income to survive.”

According to Canstar analysis, a 20-year-old who earns $449 a month and currently has no super could have $118,084 in their super balance at age 67. But if the threshold is not scrapped, they could end up with a nest egg of next to nothing.

Scott Connolly, ACTU assistant secretary, says that the Morrison Government’s inability to quash the superannuation threshold before the end of this calendar year is a massive failure.  

They said they would ensure predominately women workers earning under $450 a month would be paid their super, instead they’ve put it on the back-burner.

“Five days in parliament is likely all the Government has allowed for the $450 threshold to be legislated before the election, making it seemingly unlikely that they will fulfil yet another budget promise.”

Compounding disadvantage – especially for female workers

A Canstar analysis shows that the scrapping of the threshold will have a significant impact on the finances of low-income workers, especially those in the early stages of their career.

According to the analysis, a 20-year-old who earns $449 a month and currently has no super could have $118,084 in their super balance at age 67.

But if the threshold was not scrapped, they could end up with a nest egg of next to nothing.

And for women, who comprise 89 per cent of the nursing, midwifery and carer workforce, it is already an uphill battle to develop independent financial security.

According to KPMG analysis, women approaching retirement age have, on average, between 22 and 35 per cent less super than men.

A combination of women predominantly working in lower paid industries (such as aged care) and time taken out of the workforce to care for younger children are said to be primarily responsible for this difference.

Fiona York, executive officer of Housing for the Aged Action Group, tells Aged Care News that half of women approaching retirement aged (55-59 years old) have a superannuation balance of $50,000 or less.

“And around a third of women aged 60-64 years old have no superannuation at all.”

Fiona York, executive officer of Housing for the Aged Action Group (HAAG) says that half of women approaching retirement age have a superannuation balance of $50,000 or less, whilst a third of women aged 60-64 years have no superannuation at all.

And sadly, the current legislation may not go far enough to remedy the disadvantage.

Data from Chartered Accountants Australia and New Zealand (CAANZ) suggests that even once the superannuation threshold is overturned, the new super entitlements will largely be eaten away by management fees and insurance.

Without further reforms, CAANZ estimates that the extra $567 per annum will become, after fees, a measly net $262.

Low superannuation threatens long-term housing security

York tells Aged Care News that women who do not own their own home, when coupled with a low superannuation balance, are often placed in a precarious position come retirement.

“Unfortunately, many women who come to our service with a small amount of savings or superannuation find themselves with very few housing options,” York says.

“They are ineligible for social housing due to the ‘asset limit’ yet do not have enough money to afford to buy into retirement housing or other housing.

“We refer to this cohort as ‘the missing middle’.”

Unable to technically seek support above the basic pension, many older women struggle to makes ends meet, thus beginning the slow and painful descent into financial ruin and, in worst case, homelessness.

After working in the care sector for almost 50 years on a low income, I couldn’t accumulate enough super to survive in ever-increasing rental market and manage other expense. I was ready to live in my car when thankfully, I found transitional accommodation.

Sydneyite Suzannah, 68, who worked for 50 years in aged care and disability support

It is an issue highlighted by a recent report by the Australian Institute of Health and Welfare (AIHW): Specialist homelessness services annual report 2020-21.

Contrary to stereotypes, which often attribute issues such as substance abuse to the root cause of financial destitution, the report notes that more than half of older persons’ experiencing homeless have lived “conventional” lives.

“Three factors may be important for this subgroup, which is more often female, educated and in good health: (1) they have an element of financial insecurity, often because of a history of low paid or insecure work, (2) they are unfamiliar with health and welfare systems, (3) they may have a reluctance to draw on existing social capital,” the report reads.

Even with support from the pension, there is little chance that such elders can compete in the private rental market.

Anglicare’s Rental Affordability Snapshot, which surveyed nearly 25,000 rentals in Sydney and Illawarra region, found only 26 properties affordable to single people receiving the Age Pension.

“Aged Pension rates assume home ownership,” York says.

The Retirement Income Review [carried out by the Australian Government in November 2020] found that people on the Age Pension who own their own homes were able to “achieve a minimum standard of living” in retirement, however, those who are renting in the private market need additional assistance.

“We are calling on the Government to immediately increase the base rate of income support payments, including Commonwealth Rent assistance, to provide support to older renters in housing stress, many of whom are in sub-standard and insecure housing.”

Contrary to stereotypes, which often attribute issues such as substance abuse to the root cause of financial destitution, the report notes that more than half of older persons’ experiencing homeless have lived “conventional” lives.

During the 2020-21 financial year, HAAG supported close to 1000 people, and their organisation is no stranger to the plight of hard working, yet underpaid aged care workers.

Su, a 68-year-old woman living in Sydney, worked for almost 50 years as an aged care and disability support work, but her resulting superannuation balance provided little support in return upon her retirement.

She details her experience in a newly released report by HAAG, Older Women’s Network NSW, among other industry bodies.

Despite her long, dedicated career, she found herself drawing down on her super to cover her rental costs, which alone exceeded her pension of $1091 per fortnight.

“After working in the care sector for almost 50 years on a low income, I couldn’t accumulate enough super to survive in ever-increasing rental market and manage other expenses,” she says in the report.

“I was ready to live in my car when thankfully, I found transitional accommodation.”

Astoundingly, the report indicates that Su was one of an estimated 110,000 women aged over 45 who are at risk of homelessness in New South Wales.

Comprehensive financial reforms needed to help vulnerable workers and retirees

York and her team at the HAAG are working to increase service availability to all persons who are vulnerable to homelessness, especially in the early stages.

And single policy approaches, such as the proposed amendment to superannuation thresholds, are simply not comprehensive enough.

“We are calling on the Federal Government to implement the recommendations from the 2016 Senate Inquiry into Economic Security for women in retirement, which incorporate a broad range of tax, superannuation, workplace, housing and aged care policy reforms,” York says.

The Home at Last service, which HAAG provides in Victoria, has seen promising results.

“[The service] includes tailored housing information to assistance with housing applications, support during the move, establishing a new home and referrals into aged care and other supports,” York says.

“A key component of our service is its focus on early intervention, through community education to reach people at risk of homelessness before they reach a crisis point.

We are calling on the Federal Government to implement the recommendations from the 2016 Senate Inquiry into Economic Security for women in retirement, which incorporate a broad range of tax, superannuation, workplace, housing and aged care policy reforms

Fiona York, executive officer of Housing for the Aged Action Group (HAAG)

Not only is it an effective program, but York notes it is fiscally efficient for governments, too.

“A recent cost-benefit analysis by Ernst Young found that Home at Last provides $2.30 societal value for every $1 spent,” she says.

At this stage, however, other states are yet to fund similar services.

With current support for older persons funded through the outgoing Commonwealth Home Support Program, it is unclear as to what the material impact on service delivery will be through the incoming ‘carefinder’ programme to be established in 2022.

“We are working to ensure that the focus on housing outcomes for older people is not lost in the transition,” York says.

More about the HAAG

Housing for the Aged Action Group (HAAG) is the only Australian organisation of its kind specialised in the housing needs of older people.

Established over 30 years ago as a grassroots movement, the organisation delivers a housing information and support service for older people in Victoria and advocates for older people experiencing housing and homelessness related issues across the country.

During the 2020-21 financial year HAAG supported close to 1000 people, including over 150 people supported into long-term housing.

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