Super Woman: closing the gender super gap
Financial independence and security holds particular relevance for women. In recognition of how good financial planning can help women achieve their life and wealth creation goals, these tips can help boost superannuation savings and close the gender super gap.
For as long as women have been active in the workforce, they have faced financial inequality – from the ‘gender pay gap’, which sees women working full-time earning 18 per cent less than men (and female graduates earning $5,000 less than male graduates in the same role), to the ‘super gap’, which sees women currently retiring with 44 per cent less super than men. ABS data from 2017 shows the average super balance for women aged 55 to 64 is $180,000, but for men it’s $322,000.
Despite 65.3 per cent of the workforce being female, workplace practices and government incentives still favour men. Women only receive one-third of the government tax concessions on super and it is estimated 220,000 women miss out on $125 million of super contributions because many work more than one part-time job so they do not meet the requirement to earn $450 per month from one employer. This, coupled with the fact that more women take time out of the paid workforce to raise families or care for elderly relatives (on average five years), work part-time (43 per cent), are single in their sixties (in 2017, 17 per cent lived alone ), retire earlier (on average at the age of 60, compared to 67 for men) – not to mention live longer (on average five years longer than men) – means that many women head into retirement financially vulnerable.
Statistics from Women in Super reveal:
- the average female salary is $44,000 (including part-time workers)
- 44 per cent of women rely on their partner’s income as the main source of funds for retirement
- 40 per cent of older single retired women live in poverty and experience economic insecurity in retirement
- 8.5 per cent of women aged between 65 and 74 still have a mortgage
- the 9.5 per cent Superannuation Guarantee does not enable most women to accrue sufficient savings for a comfortable retirement
But things are turning around. According to research by Roy Morgan, the proportion of women with superannuation has improved in the last decade. Today, 64.7 per cent of women hold assets in super compared to 57.4 per cent in 2008. The survey also indicated that the average balance for women has grown by 87 per cent, jumping from $68,000 in 2008 to $127,000 in 2018. The average balance for men also grew 53 per cent from $115,000 to $176,000.
The ‘super gap’ is being slowly eroded. The research found females aged between 50 and 59 made the biggest gains in the last decade (improving 15.2 percentage points), jumping from only 54.5 per cent of the male super average in 2008, to 69.7 per cent in 2018. Those aged 35 to 49 also bridged the gap by 14.2 percentage points to 75.4 per cent of the male average, while women aged 60-plus were up 9.8 percentage points to 72.1 per cent. Women aged 14 to 34 were closest to matching the male average at 85.6 per cent.
“Financial independence and security, especially when it comes to retirement, should be a priority,” said EBM Financial Planning Managing Director Jay Manley.
“Enjoying a comfortable lifestyle in retirement should be the reward for everyone who has worked hard all their lives. Despite the advances being made to close the gender pay and super gaps, many women will still head into retirement facing financial uncertainty.
“Having your financial future on a secure footing should be a key consideration for all, and investing in your super can be one way to help cement that foundation.”
Jay suggests women should look at boosting their super by:
- starting early, don’t leave retirement planning too late as the sooner you start the sooner you can build your balance
- making voluntary contributions
- using concessional or salary-sacrificing incentives to build your balance
- considering non-concessional or after-tax contributions also, as these are not subject to the 15 per cent contributions tax that can apply to other types of contributions
- seeing if you are eligible for a government co-contribution
- investigating whether the new super rules that came into effect in July 2018 which allow people to make catch-up tax-deductible contributions to super is applicable
- if you have a partner, seeing if they can make contributions to your super account on your behalf (spouse contribution or contribution splitting arrangements), they may be eligible to claim a tax offset
- looking into the aged pension (which remains the main source of income for almost three-quarters of retirees) and other government payments
- choosing your super account wisely, selecting one that best meets your needs
- selecting an investment protocol (e.g. balanced, cash, growth) that matches your risk profile and stage of life
- keeping track of your super to make sure your investment is working for you
- tracking down any lost super
- seeking guidance on consolidating super accounts
- contemplating continuing to work part-time in retirement
“Another key strategy for women looking to set themselves up financially is to engage the services of a qualified financial planner. A financial planner will take a holistic look at your financial life and help you develop strategies to reach your goals,” said Jay.
Speak to an EBM Financial Planner about ways to boost your superannuation and other strategies to grow your wealth and live the lifestyle you want.
According to the Association of Super Funds Australia (ASFA), super balances have grown to an average of $214,000 for those aged between 60 and 64 in 2016, with a median of $68,000. The 2017 HILDA survey found Australian women retired with an average super balance of $230,907 and men retire with about twice this amount.
The Centre of Excellence in Population Ageing Research November 2018 research brief, Retirement Income in Australia, concluded single women will be less financially secure than other groups in retirement. A partnered female aged 65-69 will have almost $100,000 more in their super balance than a single woman the same age.
ASFA defines a ‘comfortable’ retirement lifestyle as one which “enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel”. As at the September 2018 quarter, for a single person aged around 65, they would need $43,200 a year to enjoy a comfortable lifestyle, a couple would need $60,843.
This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser and read the relevant Product Disclosure Statement (PDS) before making a financial decision. This document has been prepared by EBM Financial Planning Pty Ltd who are authorised representatives of Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.
Information in this document is based on current regulatory requirements and laws, as at 21 February 2019 , which may be subject to change. This document has been approved by Financial Wisdom. While care has been taken in the preparation and approval of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document. Any views and opinions provided in this article may not reflect the views and opinions of Financial Wisdom Limited.