Australian women tend to have less superannuation than Australian men.
I love being a woman and I love to work. But I do not love this statistic.
Welcome back to the superannuation series. A three-post combo designed to get you better informed about all things super.
Since covering the basics in post number one, it’s time to delve into Australian gender dynamics and how being a woman can impact your superannuation balance.
In this second post we’ll cover:
- Why women tend to have lower superannuation balances than men;
- Why this gender gap in superannuation is important; and
- How you can work towards bucking this trend and growing a healthier superannuation balance.
So let’s begin…
Why women tend to have less superannuation than men
1. Australian women earn less than their male counterparts
Statistics released by the Federal Government in early 2018 show Australian women earn an average of 15.3% less than men.
This gap fluctuates higher and lower than 15.3% depending on what industry you’re in. And surprisingly there are a few key professions where women actually earn more than their male counterparts.
But for the very large majority of Australian women, the gender pay gap is alive and well.
This pay gap impacts superannuation because contributions are directly related to how much we earn.
Superannuation contributions are paid at a minimum rate of 9.5% of our income.
Therefore, those who earn less will usually have less superannuation than those who earn more.
2. Australian women are usually the primary caregiver in their household which can mean interruptions to working life
Interruptions to working life can impact your super balance. When you are not working your super contributions are usually not being paid.
Even if you leave the workforce on parental leave, the current Australian Paid Parental Leave Scheme does not require superannuation payments to be paid.
Why this superannuation gender gap is important
Superannuation is a key tool in funding retirement. It is also something that Australian employees are required by law to have. Therefore, gender bias in superannuation is something we need to be aware of.
If you have a smaller superannuation balance when you retire, you effectively have less money to live on.
Also consider that Australian women tend to live longer than Australian men.
Meaning a woman’s superannuation balance has to last longer than a man’s.
Understanding this issue means appreciating the significant impact it’s having on our super balance.
And before you write this off as an insignificant issue, this gender gap in Australian superannuation isn’t a small one.
The Association of Superannuation Funds of Australia found the average super balance of a 65 year old woman is $171, 227. While the average balance of a 65 year old man is $246,915.
That’s a $75, 688 difference.
Similar research by HILDA found an even larger gap between men and women who had retired within the last four years.
Women had an average of $230,907 in superannuation. While men had an average of $454,221.
That’s a $223,314 difference.
Quality of life in retirement is impacted by a number of factors, but money is a key one.
Money determines what you eat, where you live and the types of activities you enjoy.
While retirement can seem like a destination far off in our future, if you want to make positive changes to your final superannuation balance, it’s time to start acting now.
How to grow a healthier superannuation balance
There are a number of ways Australian workers can boost their superannuation balance. While these steps are important for women affected by the superannuation gender gap, they can be useful for Australians of all genders.
Your employer isn’t the only entity who can make contributions into your superannuation account. You can make your own voluntary contributions too.
This means you can grow your superannuation while you are earning more, to compensate for the times you are earning less, or not working at all.
There are two key ways to do this. Pre-tax. Or post-tax.
Pre-tax contributions are commonly known as salary sacrifice. This process instructs your employer to redirect a portion of your wage into your superannuation account (instead of into your regular bank account).
Salary sacrificing can offer some serious tax benefits too, because the portion of your wage redirected into super is taxed at a lower rate than if it was taxed as part of your income.
There are restrictions on how much money you can redirect into your superannuation via salary sacrifice, and it isn’t always beneficial for those in the lowest income bracket.
That brings us to post-tax contributions, voluntary payments made into superannuation AFTER you have received your wage and paid tax on it.
2. Spousal contributions
If you are a non-worker or low income earner, your spouse may be able to make a contribution into your superannuation account on your behalf. This is known as a “spousal contribution”.
This type of contribution can be especially relevant if you are taking time off work as a primary caregiver, or have returned to work in a part-time or casual basis.
As with salary sacrificing, there are tax benefits to these spousal contributions.
Spousal contributions are available to both legally married and de facto partnerships.
3. Contribution splitting
Your spouse can choose to split a portion of their own personal superannuation contributions into your superannuation account.
This process can be especially relevant when one spouse is earning significantly more than the other.
There are a few rules and regulations around this one, so I would recommend doing more in depth research before diving in.
4. Government co-contributions
Low income earners may be eligible to access the Federal Government’s Superannuation Co-contribution Scheme.
This scheme aims to support low income earners saving for their retirement.
Basically, the government “chips in” every time you make a voluntary after-tax contribution into your superannuation account.
This scheme is open to both employed and self-employed workers. You can learn more about it here.
While this scheme may not be currently relevant to you, it could become more useful during periods when you are non-working or have returned to work in a part-time or casual basis.
So that’s it. A few key pieces of information about why women tend to have less superannuation. Plus a few simple steps to grow your super balance.
I don’t have all the info but I want to get you thinking about this stuff NOW.
My key message is to get educated. Arm yourself with knowledge and take ownership of your superannuation.
Every woman will have a different experience and some may even choose to largely fund their retirement through other means.
But please know that if you choose to leave the workforce, or become a primary caregiver, your superannuation does not need to suffer.
While the gender pay gap still exists, it does not need to determine your super balance. There are steps we can take and there are a lot of organisations working towards closing this gap.
If you’re interested in learning more I recommend checking out the work being done by Sally Loane and the Financial Services Council and the Workplace Gender Equality Agency, especially their latest piece, Removing the Motherhood Penalty.
Good luck and happy saving!
Until next time,