The IQ Group Executive Team. From left to right: Katherine Forrest, Head of Customer. Samantha Muir, Head of Operations. Martha Villamil, Head of Capability.
On International Women’s Day we thought it was a good time to take a look at an issue that is often overlooked when it comes to Superannuation; the retirement balance gap. Women currently retire with 47% less superannuation than men. By 2030 it is estimated that the gap will have reduced to 39%, but this is still a concerning difference. While this issue has been a topic of discussion for many years, the numbers still indicate only modest changes.
As a consulting company in the Superannuation industry led by an executive team made up of three incredibly talented women, this issue is one we also feel strongly about on a personal level. It may not be a new issue, but it’s an important one that impacts over half of Australia’s population.
What is causing the gap?
Employer Superannuation contributions became compulsory in 1991. Being almost three decades old, this was a system designed around men and a traditional view of employment. Unfortunately today this system leaves many women at a huge disadvantage in retirement. The average woman lives five years longer than the average man. Longer-term effects of this gap lead to a higher level of dependence on the aged pension for females, as well as high levels of poverty faced by women – particularly in old age!
As with many issues, it is hard to identify a single reason for this 47% balance gap. A whole lifetime of circumstances and choices contribute to this number.
Caring for Children or Family Members:
The wage gap may be a contributing factor to this weighty balance gap, but the likely leading factor is that many women leave the workforce for an extended period to be a primary caregiver. Women often have their working lives interrupted by raising children. Often this will mean taking time out of the workforce or opting to work concentrated hours. 43% of women currently work part-time. On average women will take five years out of the workforce to care for children or family members, causing their Super savings to stagnate and fall behind that of their male counterparts.
Most women receive some form of paid maternity leave, either from the government or their employers, but these plans do not generally include superannuation. Women are often also the carer for elderly parents and for many, they don’t get a chance to earn decent money till later in life.
Super is Based on Income:
Despite women making up nearly half the workforce, the average woman still brings home noticeably less than the average man. Compulsory employer Super contributions are based on a percentage of what employees earn, currently 9.5% p.a. The average full-time working woman earns 18% less than the average man and leads to women receiving less retirement money as a result.
The current 9.5% Superannuation Guarantee does not enable most women to accrue sufficient savings for a comfortable retirement. An estimated 220,000 women miss out on $125 million of superannuation contributions as they do not meet the requirement to earn $450 per month from one employer.
How to Minimise the Balance Gap?
There are some things women can do to help improve their retirement outcomes. These include:
- Choosing a super fund wisely and keeping track of the balance
- Consolidating all super into one account to reduce fees
- Eliminating unnecessary insurance
- Choosing the right investments inside of super
- Salary sacrificing and making additional after-tax contributions
- Seeking for tailored advice will help make better decisions
- Driving awareness, and engaging women on the topic of super
And finally, super funds can be helping their female members overcome these challenges by fostering awareness and ensuring contributions to their future financial security are simple to make.
Consultant Developer, IQ Group