Gender based pricing of #DC #superannuation benefits

There is an interesting application currently in front of the Australian Human Rights Commission. In essence, the applicant is requesting an exemption from the Sex Discrimination Act 1984 to be permitted to pay its female employees a higher rate of defined contribution into superannuation than it pays for its male employees. The applicant argues that paying the same rate of contribution (as a percentage of earnings) is discriminatory because females as a group live longer than males and therefore need more superannuation savings. The exemption request is to guard against disgruntled male employees claiming they have been discriminated against.

This application is interesting for several reasons.

Firstly, it is based on the premise of need. We normally think of DC superannuation as a fixed rate of contribution and the end benefit emerges based on the experience of investment, fees, taxes, longevity etc. In this case, by basing the application on need, the applicant is applying a defined benefit approach in that the benefit is determined first and the required rate of contribution is then worked out.

Secondly, by following the needs premise, the extension of the argument to contribute less for males because they die earlier is that the applicant should pay even less for obese people, for smokers, for indigenous people and so on. It is not clear from the publicly available documents if the applicant has sought exemption to pay less for those groups. I imagine that by taking this approach, the rate of contribution to be paid for an employee who is indigenous, male, obese and a smoker would have to be quite low.

Thirdly, it is interesting in that the applicant is taking a path that is opposite to that taken by the European Court of Justice in 2011. In its ruling, the Court of Justice ruled that “gender specific pricing for insurance contracts, was not consistent with the EU’s long term principles of equality.” Meaning that all annuities, for example, must be priced on unisex terms, despite the fact that females live longer. In superannuation terms that translates to a requirement to pay the same rate for both genders.

It would seem that if the HR Commission is to grant the requested application, then it must conclude first that all defined contribution plans that pay the same rate for both genders discriminate by sex and that such discrimination would be unlawful but for the exemption. That would set the cat among the pigeons.