Mind the gap: Women finish last in the super stakes
March 16, 2016
Recent research has shown that woman retire with far less superannuation than men ― so why the gap, and what can we do about it?
The gender super gap has been a hot topic for discussion in recent years, with new research confirming that woman are still lagging men when it comes to saving for their retirement. As the gap in the average super balance widens over their working lives, women are retiring with significantly less in the bank than their male counterparts ― contributing to a higher poverty rate for elderly women1.
HOW BIG IS THE GAP?
A 2014 report from The Association of Superannuation Funds of Australia revealed that the average super balance at retirement was $292,500 for men and $138,150 for women ― a gender gap of 47.2%2. Men also have much higher engagement with the super system, holding around two-thirds of all account balances.3
5 REASONS WOMEN ARE FALLING BEHIND
Over the course of a woman’s life, several factors combine and accumulate to put her at a disadvantage when it comes to retirement savings.
1. WOMEN EARN LESS THAN MEN
The financial divide between men and women begins with a gap in wages which has ballooned to 18.1%4. And far from narrowing, this trend has been increasing for the past 20 years. As women generally earn less than men, their employer contributions to super are also lower ― with an effect compounding over the years towards retirement.
2. WOMEN SPEND LESS TIME IN PAID WORK
Although paid maternity leave enables women to continue adding to super after having a child, there still exists a cultural expectation that a mother will be the primary carer for her children. As a result, women are more likely to take time out of the workforce ― and return to work in part time or casual positions. Only 34% of women aged between 35 and 44 are in full-time employment compared with 75% for men, which means fewer years to contribute to their super balances.
3. WOMEN WORK IN LOWER PAID JOBS AND POSITIONS
The proportion of women in clerical and administrative roles is significantly higher than for men ― particularly in the real estate and health care sectors which have historically attracted lower salaries. And marginalised women, such as those with a disability, indigenous groups or women from culturally and linguistically diverse backgrounds, face even higher barriers to workforce participation and limited employment opportunities.
What’s more, in public, private and government sectors, women are significantly underrepresented in senior roles. In 2012, only 3% of top ASX companies had a female as chair and 3.5% had a female Chief Executive Officer.5
4. WOMEN SPEND LONGER IN RETIREMENT
In 2013, the average age of retirement for men was 59, whereas women retired at the age of 506. An earlier retirement gives women fewer years to contribute to their savings ― and more years drawing down their super balance.
And yet Australian women can also expect to outlive their male counterparts by 4.4 years, a trend reflected across developed nations across the world7. A greater life expectancy means their super savings need to last longer ― which reduces the amount they can withdraw to live on each year.
5. THE SUPER SYSTEM DOESN’T HELP WOMEN CATCH UP
Currently, all super contributions are taxed at the same rate (15%), regardless of income level. This means that low income workers and those doing paid domestic or private work are paying the same level of tax as workers on high salaries.
Similarly, the same contribution limits apply across the board ― making it difficult for women to catch up by putting extra into their super when they return to work. And because of the Sex Discrimination Act 1984, it is against the law for an employer to make additional super contributions to its female staff.8
CLOSING THE GAP
The current superannuation system is not serving men and women equally ― but little by little, we are making steps towards bridging the gender divide. In 2015, the Economics References Committee launched an enquiry into economic security for women, with the aim of shaping policy to enable women to live more comfortably in retirement.
A number of proposals have been put to the Committee9:
- Removing the $450-a-month threshold for the SG contributions.
- Allowing employers to contribute more to women’s super without breaching anti-discrimination laws.
- Increasing the Super Guarantee rate to 12% sooner.
- Rolling back proposed changes to the Low-Income Superannuation Contribution (due to take effect from 2017).
- Introducing compulsory superannuation contributions for paid parental leave schemes.10
- Reforming the age pension.
- Changing the way super contributions are taxed, according to income level.11
While there is increased momentum towards addressing the super gender gap, true reform may still be some time away. In the meantime, super funds can help their female members overcome the gap by providing education on how to make the most from their super.
Here are some key actions women can take to help close the super gender gap:
1. UNDERSTAND THE SUPER SYSTEM
Find out what benefits you are eligible for ― such as the government co-contribution and low income super contribution and understand how to maximise their benefit. Take a look at the tax benefits from super contributions and decide when and how much it is worth contributing.
2. CONSOLIDATE YOUR ACCOUNTS
Over the course of your working life, you may have opened up multiple super accounts by changing jobs. Do some research around which fund is best suited to your needs ― then save on fees by combining all your accounts into a single one. This will enable you to keep track of your super savings and make the most of compound interest to grow your balance.
3. BOOST YOUR RETIREMENT SAVINGS
Putting aside even a little extra today can really pay off down the track, especially when you consider the effects of compound interest. One way to do this is to ask your employer to pay part of your salary into your super on a regular basis. These salary sacrifice contributions are taxed at a maximum rate of 15%, so if this is lower than your marginal tax rate, you’ll be saving on tax while saving for the future.
4. GET THE RIGHT COVER
Whether breadwinners or caregivers, women play an important role in communities and families ― and they need solutions to protect them financially in case they become ill or injured.
If you work, you need to consider how to protect against a sudden loss of income. And if you have taken time out of the workforce to raise a family, you’ll need to consider how you would manage the costs of having someone do your unpaid work — like childcare and work around the home. That’s why it’s essential to have the right insurance cover.
This year, MetLife is conducting research to help us gain a deeper understanding of women’s insurance needs. This intelligence will form the foundation of a new product offering to be released in 2017.
The new products will include simple design, with female-friendly features such health monitoring support, and aim to recognise the many roles that women play — in their homes, workplaces and communities.
5. START PLANNING EARLY
While you’re young, you’re unlikely to give much thought to retirement. But the earlier you start saving, the more prepared you will be when you hit retirement age. ASFA estimates that the amount of super you need at retirement is $545,000 for a single person12 ― so by setting your goals now and working towards it through your lifetime, you’ll be able to achieve your desired lifestyle in retirement.
WORKING TOGETHER TO CLOSE THE GAP
To overcome the gender super divide as a society, we all have a responsibility to support women ― in building up their retirement savings and enjoying an equal future.
 Roger Wilkins, Melbourne Institute of Applied Economic and Social Research, The Household, Income and Labour Dynamics in Australia Survey: Selected Findings from Waves 1 to 12, at https://www.melbourneinstitute.com/downloads/hilda/Stat_Report/statrepor...
 The Associate of Superannuation Funds of Australia Limited, Superannuation account balances by age and gender (12/2015) written by Ross Clare, ASFA Research & Resource Centre at http://www.superannuation.asn.au/policy/reports, pg 3
 Refer above pg 4
 Workplace Gender Equality Agency, Gender pay gap statistics (3/2016), at https://www.wgea.gov.au/sites/default/files/Gender_Pay_Gap_Factsheet.pdf
 Equal Opportunity for Women in the Workplace Agency (EOWA), 2012, 2012 Australian Census of Women in Leadership, at www.eowa.gov.au.
 Australian Bureau of Statistics, Retirement and Retirement Intentions, July 2012 to June 2013 (cat. no. 6238.0), at http://www.abs.gov.au/ausstats/abs@.nsf/mf/6238.0.
Australian Institute of Health and Wellbeing, Life Expectancy, http://www.aihw.gov.au/deaths/life-expectancy/.
 In December 2014, Adam Bandt Greens member of the House of Representatives, introduced a bill which would exempt employers from strict compliance with section 14 of the Act in these circumstances, but the Bill was not considered, and the Bill was not considered.
 The Associate of Superannuation Funds of Australia Limited, The future of Australia’s super: a new framework for a better system (11/2014) athttp://www.superannuation.asn.au/policy/reports & Australia and New Zealand Banking Group Limited, Submission to the Australian Senate’s inquiry into economic security for women in retirement.
 Australia and New Zealand Banking Group Limited, Submission to the Australian Senate’s inquiry into economic security for women in retirement.
 Deloitte Touche Tohmatsu Limited, Shedding light on the debate Mythbusting tax reform, report no. 2, (10/2015) at http://www2.deloitte.com/au/en/pages/tax/articles/tax-reform-debate-myth...
 ASFA Retirement Standard, Dec 2015
This document has been prepared by MetLife Insurance Limited (MetLife) (ABN 75 004 274 882, AFSL No. 238096). Although the statement of facts in this document are obtained from sources that MetLife consider reliable, no warranty as to the accuracy, reliability or completeness of any such information is provided.