Being an accountant, I can't help but be a super nerd. Currently women are retiring with 47% less superannuation than men. It’s no surprise that women have less superannuation than men, at all stages of life. Whilst our reliance on self-funded retirement takes the pressure off the government to support an aging population, the system is inequitable for one half of the population who, on average, earn less, perform a greater share of unpaid work and live longer. The reasons for the super gap are often discussed, and yet there remains no obvious solution to this problem. Here is quick recap of the main reasons for the super gap.
1. Women often work less so that they can care for others. Taking care of little people and other family members who may be aging or disabled is a role usually taken on by women, with little or no financial gain for themselves. While there is some Government assistance available in the form of a careers allowance and paid maternity leave, these amounts are minimal and do not include a superannuation component.
2. The gender pay gap is real and it’s not just due to women working part time. The current gender pay gap for Australia is 14.6% for full time employees. This is due to a number of reasons. Firstly, industries dominated by women generally involve caring for others and are usually considered less worthy and pay less. For women who work in male dominated industries, they are more likely to experience unconscious gender bias, outright discrimination and even sexual harassment, making it hard for them to achieve the same levels of financial success as their male counterparts. They are often disadvantaged from the outset. Did you know that female graduates earn $5,000 less than male graduates in the same role? Less pay means less employer contributions into super.
3. Women are more likely to be single parents and therefore must often bare the cost of childcare. Not only this, they carry the lion’s share of childrearing duties and other domestic duties often whilst working full time. Heck, even some women with able husbands have to do most of the work both in and out of the home. No wonder women are tired. It makes me weary just thinking about it.
4. People over 55 are among those who find it hardest to get jobs and the problem is more acute for older women. This is one of the reasons that women over 55 are the fastest growing demographic of homeless people in Australia.
5. Women tend to retire earlier than men presumably because they can’t find work or are caring for others (refer points above). Women also have a greater life expectancy than men and so have a longer retirement period to fund. For women who are married, the only regrettable upside to this conundrum is that you are statistically more likely outlive your husband and hopefully benefit from any inherited wealth.
It all seems rather gloomy, I know, but don’t despair. Here are some suggestions for nurturing your super balance before you retire.
· The most obvious suggestion is to make additional contributions to your super fund either through a salary sacrificing arrangement with your employer or by depositing funds directly into your super account. Rather than think of these voluntary contributions as a personal sacrifice, consider them an investment in yourself, because you’re worth it. Your super fund is actually the perfect savings account: easy to put money in, difficult to get money out and lower tax on investment earnings. Making additional super contributions may also have tax benefits, however, there are limitations, so please check out the ATO website or speak to a financial adviser (which I am not) to get more information.
· Find the right super fund for you. There are many types of funds out there with different fees and performance histories. The ATO website has information on what to look for when comparing superannuation funds.
· Get to know your superannuation fund better, to ensure the fund is doing the right thing for you. Did you know that most superannuation funds offer multiple investment options and free financial planning advice? We all love free stuff so find out if your superfund offers this service.
· Consolidate your super funds and claim any lost super. You’re probably sick of hearing this (I know I am), and yet there remains nearly $12 billion worth of unclaimed super in Australia. I keep checking the ATO register in the hope that some of that fortune miraculously turns out to belong to me, but to no avail. Maybe some of it belongs to you.
· If you are in paid work, check your employer is making the right contributions. Presuming they are, the best way to increase your employer’s compulsory contribution into your super fund is by getting that pay rise. Asking for a pay rise is not always an option, but just remember, even a small pay increase of a few percent means that you can put a little extra into your superfund.
· 44% of women rely on their partners’ superannuation contributions in retirement. So, if your partner is the main breadwinner, ensure they have appropriate life and disability insurance, because if something happens to them, your shared superannuation balance may stagnate. Generally, superannuation funds offer life and disability insurance at competitive rates, so make sure they/you are covered. And while we’re at it, perhaps your partner could do with a pay rise as well. Pay rises for everyone, I say!
· Mothers tend to have the lowest superannuation balances. If your little darlings have reached adulthood and continue to live under your roof, rent free, perhaps it’s time to suggest a deal. You will continue to provide free accommodation on the condition that they return the favour and provide free accommodation for you upon your retirement. Hopefully this will inspire them to cut the purse strings, thereby reducing your bills and allowing you to make additional contributions to your super fund. The risk is that they decide to stay forever, thereby requiring you to live with them for the rest of your life. Sounds risky, I know. Perhaps scrap this idea.
All jokes aside, the financial difficulties facing women in retirement is a systemic problem that cannot be fixed at an individual level. Governments need to take further steps to ensure older women are financially secure by providing more support to single parents, low income earners and carers, who are mainly women. We all deserve to be happy in our retirement (and preferably not forced to be living off our children).
An abridged version of this post was published on MoneyMagazine on 7 March 2019.