Posted on 10/11/2016
When it comes to super savings, if you are a female it’s likely your balance is going to look a whole lot different to your male colleagues.
Data compiled by the Workplace Gender Equality Agency shows that on average, Australian women retire with around half the super balance of males - $104,734 versus $197,054.
So why the great divide?
Lisa Palmer, Head of Financial Planning at Statewide Super[1], said the gender pay gap which currently stands at just over 16% is often cited as a key reason for a male’s super balance to be higher than a female’s.
“With the requirement that employers pay 9.5% of your pre-tax salary into your super fund, men already have a head start on women due to their higher incomes – and that’s before lifestyle decisions come into play,” she said.
Lisa added that women tend to prioritise relationship factors over finances more so than men, and some of the financial choices they make reflect that.
“These life choices are ones that females typically make for their family – whether it be taking maternity leave for their own children and then working part-time while they raise the kids, or taking an extended period of time off work and/or working part-time to care for their parents as they age,” she said.
“Through taking these extended periods of time off work they are limiting their earning potential and this ultimately affects their superannuation balance.”
Lisa said she has also seen women make decisions during relationship breakdowns, which impact their super.
“Women tend to choose the family home when they are dividing up assets, which means they gain less in the way of financial assets, including superannuation.
“At that point of time keeping their family home is more important to maintain stability for their children.”
How can women boost their superannuation?
Lisa said it’s vital for women to take control of their finances and super early.
“In the past I have worked with a lot of women who think they’re not wealthy enough to seek financial advice – but that is not the case,” she said.
“Whether you have the capacity to contribute more to your fund or not, you can still make some smart decisions to help you make the most of what you’ve got.
“Getting advice on the most appropriate investment option to better match your stage of life and the amount of risk you’re willing to take can mean thousands of dollars, or even hundreds of thousands of dollars difference in an account balance at retirement.
“If you can manage it, nothing beats being able to start actively contributing to super from an early age. Salary sacrificing a percentage of your income each pay may provide a tax-effective way to boost your super balance because the money contributed is taxed at just 15% rather than your marginal tax rate.”
Lisa said a female client of hers, who is now in her late 50s, made smart financial decisions early in her working life, which would allow her to retire now if she desired.
“My client didn’t have children, but there were times when she took extended leave from work to look after her elderly parents,” Lisa said.
“From an early age she actively contributed to her super balance and also had a regular savings plan outside super. “She bought a two-bedroom unit and paid it off quickly.
She never felt the need to upgrade her home which allowed her to focus attention on building other financial assets and her super, instead of paying off a mortgage.”
Another way for women to boost their super is to take advantage of the government’s super co-contribution.
Lisa said if their total income is less than $50,454, then they may be eligible for the government co-contribution, if they are making an after-tax contribution.
“The government will contribute 50 cents for every dollar they contribute up to a maximum of $500. This amount reduces depending on their assessable income,” she said.
Case study
Shauna Pedler, a finance manager at a South Australian marketing company whose employer-nominated fund is Statewide Super, said the majority of female employees she has worked with don’t make extra contributions into their superannuation.
“Many women don’t think about their super because it’s not their first priority while they are starting their careers or raising a family,” she said.
Shauna, who owns a home with her husband, and together the couple have one son, with a second child soon to be born, said she currently isn’t making extra contributions into her superannuation.
“I’m aware I should be putting extra away in my super because of the great benefits it will have in retirement, but I’ve come back to work part-time so I can provide for the day-to-day expenses for our family,” she said.
“When the kids are at school and I go back to full-time work I will definitely look at making voluntary contributions to my super so I can ‘catch-up’ the money I wasn’t investing while on maternity leave and working part-time.”
Shauna said one thing she has always made sure to do is to pass on her original super fund details to her new employer.
“I see so many young people with multiple super funds, after they have moved jobs a few times; they don’t realise that each fund is charging service fees, meaning their super is being depleted by fees.”
Lisa’s top tips on how women can close the super gap
- Begin to make voluntary contributions (before or after-tax) to your super from an early stage in your career
- Speak with a financial adviser to gain advice on investment options for your super and the amount of risk you’re willing to take on
- Take advantage of the government co-contrubtion super payments if you’re eligible
- Be prepared to contribute greater amounts of your salary to your super balance once you return to the workforce full-time to ‘catch up’
- If you’re going through a relationship breakdown, think about the long-term financial assets, including super, when dividing up assets
- Consider consolidating your super to reduce the duplication of fees across multiple accounts.
[1] Statewide Super holds an Australian Financial Services Licence (AFSL) that allows it to provide both general and personal financial advice. For further information and a copy of the applicable Financial Services Guide, visit www.statewide.com.au or call 1300 65 18 65.
How women can close the super gap
