The super gender gap: How can women safeguard their superannuation?

Move over gender pay gap, the superannuation gap is taking centre stage.

Recent data from the Australian Tax Office has revealed a stark disparity between men and women in terms of super balances – highlighting that the biggest financial gap between the sexes now sits in their super accounts.

In this article:

• The super gender gap
• Why does the gap exist?
• What needs to change?
• What steps can you take?

The super gender gap

This year the gender pay gap fell to 13.8%, while the super gap was revealed to be 23.3%.

Obviously the two are strongly linked, but super may turn out to be the more difficult fix given the long-term implications of a super gap.

A difference of just 0.75% less in super per year can compound to over $135,000 in lost funds over 40 years.

For Australians aged 55-59, men had an average of $51,000 more than their female colleagues – the equivalent of over three and a half years of contributions on the median national salary of $70,000 per annum.

Median super balance, by age and sex, 2019–20 financial year.

As described by the graph above, the super gap begins early and is maintained all the way through to retirement, although balances currently begin to trend toward even in the 65-69 range.

Unfortunately, the gap in those age ranges is likely to grow as the knock-on effect of lost super investment opportunities compound over the years.

Why does the gap exist?

There are several factors that contribute to the super gap.

Women make up a greater percentage of the part-time and casual workforce, which tend to be lower-paid positions.

The gender differential continues in the type of work most women take up, which generally includes administration roles, community service and sales; historically lesser-paying jobs.

Fewer women occupy senior executive or board-level positions, and women tend to retire earlier and live longer on average, further compounding the issue.

Finally, women are generally the primary carer in a family. Taking five years off work to raise children as a 29-34-year-old has the potential to reduce a woman’s average retirement savings by $100,000.

This theoretical situation is playing out across the country, revealed by the ‘Future Face of Poverty is Female’ report commissioned by AustralianSuper.

The report found that women retire with 42% less super than men. In real terms, if a man retires with a $270,710 super balance, a woman gets just $157,050.

The research concluded that the Australian retirement system doesn’t recognise nor reward the unpaid labour undertaken by women in our society.

The result is increasing vulnerability to poverty and homelessness in old age.

What needs to change?

There are several government-level solutions that could help to close the super gender gap.

Women in Super, a not-for-profit aimed at improving women’s retirement outcomes, advocates for system-wide legislative reform.

“The onus shouldn’t be on women (or their partners) to make the super system adequate so that they can retire with financial security – for this reason we don’t support further incentives which encourage voluntary contributions,” Women in Super CEO Jo Kowalczyk said.

“We would like to see legislative change which will benefit all women – including those who are low-income and do not have extra money to voluntarily contribute to their super.”

Instead, Women in Super have put together a Policy Framework – a list of policy changes the organisation believes will begin to close the gap.

They include:

• paying super on paid parental leave as it's paid on all other types of leave;
• introducing an adequacy benchmark that is an absolute amount – calculated at the rate of a living wage;
• adjusting tax concessions to ensure they are fairer in supporting those who need them most;
• realigning the LISTO with PAYG thresholds – the current LISTO rates leave some low-income earners (who are mostly women) paying more tax on their super than they should be.  Stapling the LISTO threshold to the tax brackets will ensure this doesn’t happen again;
• exploring a Carer’s Credit framework that economically values the caring work that women do; and
• holistic modelling to examine what changes are necessary and what their individual and combined impacts would be. 

“None of these changes will close the gap on their own, but each change will make a difference to many women’s retirement outcomes around Australia,” Kowalczyk said.

What steps can you take?

While policy changes are likely the only way to truly bridge the super gender gap, UniSuper’s Renae Anderson has some practical suggestions you can action yourself:

• Check if spousal contributions might work for you.

Women earning less than $37,000 per year can receive a spousal contribution of up to $3,000 a year with bonus tax break included.

• Consider ‘catch-up contributions’ after time out from the workforce.

If your total super balance is below $500,000, and you haven’t used your concessional contribution cap of up to $27,500 in previous years, take advantage of it.

• Check your fees.

Lowering fees could save you thousands by the time you retire.

• Invest early.

The earlier you start investing in your super – no matter where you’re at in your career – the earlier your money starts compounding for you.