A report released by the Bankwest Curtin Economics Centre (BCEC) and UniSuper has assessed the appropriateness of the super system for Aboriginal and Torres Strait Islander people – based on modelling of super balance accumulation and focus group responses from Indigenous super fund members.
It has outlined a number of recommendations for the superannuation sector, including an industry standard identifying Indigenous members, requiring funds to report through the Australian Superannuation Fund Association (ASFA) on outcomes for Indigenous clients (including average balances and the number of multiple and lost accounts) and to give targeted support for Indigenous people with their super.
But at a policy level, the report has called for a differential preservation age for Aboriginal and Torres Strait Islander Australians, to allow them to access their super from age 50 on the same conditions that other Australians can do so at age 65.
It has proposed that the preservation age would be reviewed on a five or 10-yearly basis and a schedule would be set for raising the age over time as the gap between Indigenous and non-Indigenous life expectancies close.
The average Indigenous man was found to accumulate a superannuation balance of $308,000 by the age of 65, 37 per cent less compared to $483,000 for non-Indigenous men.
The gap between Indigenous women and their non-Indigenous counterparts was 35 per cent, with Indigenous women being likely to have accumulated $205,000 by 65.
To add to the retirement divide, Aboriginal and Torres Strait Islander people have lower life expectancies.
As estimated by the ABS in 2019, the life expectancy for Indigenous men is 8.6 years lower than that for their non-Indigenous peers (71.6 years compared to 80.2). For women, the gap is 7.8 years (75.6 compared to 83.4).
Professor Michael Dockery from Bankwest Curtin Economics Centre (BCEC), who was the lead report author, said not being able to access super early was one of the key issues raised by Indigenous group participants in the study.
“There was clear agreement among participants that the superannuation preservation age should be lower for Aboriginal and Torres Strait Islander Australians due to lower life expectancy,” Professor Dockery said.
“The current system benefits those who are employed for a long period of time, those who have higher earnings and home owners.”
ASFA has also been called on in the report to work with the Indigenous Superannuation Working Group and the government to identify ways of amending legislation to relax hardship conditions for early access to super for Indigenous people, including easing the associated costs and tax penalties.
For Indigenous people who experience lower life expectancies, lower home ownership rates and lower labour force attachments and earnings over their lifetimes, the conditions around accessing super create a “huge disadvantage”, Professor Dockery said.
“Removing these penalties and giving Indigenous Australians early access to their superannuation funds would help to improve retirement outcomes for the Indigenous population and create a fairer, more balanced system for all,” he said.
UniSuper chief executive Kevin O’Sullivan said his fund’s Aboriginal and Torres Strait Islander Super Working Group has shown that “educational outcomes leading to wage disparities, increased health challenges and lower life expectancies all contribute to fewer opportunities for Indigenous members” under the super system.
“So if we know these disparities exist, we need to collectively do something about it,” Mr O’Sullivan said.
‘Challenges around proof of identity, financial literacy, access’
Professor Dockery said it is important to create a more culturally aligned superannuation system that provides greater support to Indigenous Australians, particularly those who may be experiencing significant disadvantage or hardship.
“When engaging with superannuation funds, Indigenous Australians face challenges around proof of identity, financial literacy, access to services and consolidating multiple accounts,” Professor Dockery said.
“To improve service delivery and access for Indigenous clients, we recommend the establishment of a specialised Indigenous support and advocacy unit to assist Indigenous people with issues and inquiries relating to their superannuation.”
The cross-industry support unit, as suggested by the report, would be independent, supported by an industry code of conduct, staffed by Indigenous people and accessible online through web chats and video links.
The white paper has also asked that relevant super data be made available and be incorporated into the government’s Overcoming Indigenous Disadvantage reporting framework, to be counted under economic participation.
Dr Julie Owen from the Curtin’s Centre of Aboriginal Studies said the system has already shown it can provide support to those in need through the COVD-19 pandemic.
“As we have seen during COVID-19, many superannuation funds have allowed struggling Australians to access some of their superannuation early, without needing to pay tax penalties on the money withdrawn,” Dr Owen said.
“If these types of restrictions can be relaxed during an ongoing pandemic, then we should be able to make similar efforts given the circumstances facing so many Indigenous Australians.”
