The majority of self-employed Australians have lower levels of superannuation across all age groups compared with employees and most will struggle to achieve a comfortable retirement.
Women are at a particular disadvantage.
New research by the Association of Superannuation Funds of Australia (ASFA) highlights the low superannuation balances of the self-employed compared with wage and salary earners and the absence of any significant retirement savings for many of the self-employed. The disparities in super balances between the self-employed and employees have not diminished over the past decade.
ASFA found the majority of the self-employed have either no or low superannuation balances and do not make regular super contributions, despite the availability of tax concessions. Only a small proportion of the self-employed have high super balances.
Around 19 per cent of the self-employed have no super, compared with only 8 per cent of employees.
In general, self-employed people have lower superannuation balances than employees at all ages and self-employed women have particularly low balances.
In the run-up to retirement, the self-employed have only about half the super savings of employees.
The average super balance for self-employed men at age 60-64 is around $143,000, compared with $283,000 for male wage and salary earners. Self-employed women in that age cohort have only $83,000, compared with around $175,000 for female wage and salary earners.
A comfortable retirement requires super lump sums at retirement of $545,000 for individuals and $640,000 for couples.
Female self-employed have significantly lower superannuation balances than both female employees and the male self-employed. In the run up to retirement, the average balance for self-employed women is around half that of female employees and the male self-employed.
ASFA is calling for the Superannuation Guarantee (SG) to be extended to formally include the self-employed and to ensure SG coverage for gig economy workers. This would lead to higher retirement incomes for workers and help boost the broader adequacy of the superannuation and retirement income system. ASFA believes all Australians should be included in compulsory savings arrangements, as well as being able to save voluntarily.
ASFA CEO Dr Martin Fahy said around 10 per cent of the national workforce, or 1,267,000 people, is self-employed but this will increase with the rise of the gig economy, where buyers and sellers of goods and services are organised via web-based platforms.
“Most new gig workers will be self-employed contractors,” he said. “Without reform to provide SG for these workers, many will end up with insufficient retirement income.”
ASFA is developing proposals to formally include the self-employed in the SG regime and also ensure SG coverage for gig workers. To this end, ASFA will be talking to some of Australia’s major gig economy platform operators. ASFA will release a policy paper on the gig economy and superannuation in coming months.
For further information, please contact:
Teresa Mullan, Media Manager, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia's superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.