Estimated reading time: 6 minutes
It’s a fact that women retire with a lot less super than men. So, what can women do to grow their super and safeguard a comfortable retirement? By Angela Tufvesson
You’ve probably heard about the gender pay gap—at a little over 13 per cent, it means women earn an average of $242 less than men each week. But there’s another gap you may be less familiar with that’s just as damaging to women’s long-term finances: the superannuation gap.
According to the Association of Superannuation Funds of Australia (ASFA), the median superannuation balance for women aged between 60 and 64 is $137,051 compared with $178, 808 for men—a gap of 23 per cent. Research by the Workplace Gender Equality Agency shows the superannuation gap persists across all age groups.
Worryingly, many women retire with no super, says ASFA’s director of policy, Fiona Galbraith. “Around 23 per cent of females in that age group have no superannuation compared to 13 per cent of males.”
Retirement might seem impossibly far off or scarily close but making smart choices with your superannuation can prove the difference between scraping by and thriving after your veterinary career comes to an end.
Exploring the gap
The reasons why women retire with less superannuation than men are complex but largely centre on caring responsibilities. Women are much more likely to take time out of the workforce to care for children, as well as elderly parents and sick family members. Because superannuation contributions are tied to income, less money is squirrelled away for retirement.
“In Australia, women are the predominant carers,” says Sandra Buckley, CEO of Women in Super, a not-for-profit working to improve women’s retirement outcomes. “By having to do that caring work, they either drop out of the workforce or they drop down to part-time.”
What’s more, Yvonne Van Der Beek from GuildSuper, of which around 85 per cent of members are women working in the veterinary, pharmacy, allied health and childcare industries, says many women work several part-time or casual jobs and don’t earn the required $450 per month from each employer to qualify for superannuation contributions.
“Women might be out of the workforce for five or six years, then come back part-time and not earn enough money to be eligible for the super guarantee,” she says. “This might go on for a number of years, so it’s then a case of catch-up. With superannuation, the idea is that contributions keep coming in and it grows and grows with compound interest, so those years can have a big impact.”
And, of course, there’s that pesky gender pay gap, which measures the difference between the average earnings of women and men in the workforce. It’s the result of social and economic factors like unconscious bias in hiring and pay decisions and female-dominated industries attracting lower wages that combine to reduce women’s earning capacity over time—and, as a result, their superannuation.
“While this can be less of an issue for women in professional roles, to the extent that women earn less than men this will affect their super,” Galbraith says.
Not enough savings
ASFA says a modest lifestyle in retirement will mostly be met by the age pension plus a superannuation balance of around $70,000. For a “comfortable” retirement, you’ll need around $545,000 in superannuation or $640,000 for a couple in addition to a part age pension—so it’s perhaps no surprise that 44 per cent of women rely on their partner’s income as the main source of funds for retirement.
When superannuation balances are meagre, trouble can arise when unexpected expenses crop up, says Buckley. “Women usually retire with some super but often it’s a small balance, and because it’s small, they tend to go through it quite quickly when hit with a major cost such as replacing the fridge or repairing the car.”
The age pension is just $476 per week, which can affect quality of life—your ability to travel, take up hobbies and keep up with household expenses. But the biggest impacts are felt by women who don’t own a home when they retire.
“Women live on average longer than men, so if you don’t own your own home outright, your superannuation usually isn’t sufficient to cover private rental bonds or payments over the retirement phase, whether you’re living regionally or in a big urban centre,” Buckley says. “And this is exacerbated by an aged pension that is inadequate to cover living and rental expenses.”
It’s estimated that 40 per cent of single retired women live in poverty and experience economic insecurity in retirement. “Women are often one step away from being homeless,” Buckley says.
The good news, Galbraith says, is the superannuation gap between men and women is narrowing. She says making additional voluntary contributions throughout your career is the most effective way to grow your superannuation and plug the gaps of part-time work or time out of the workforce.
“This can be done through making ‘salary sacrifice’ contributions, or contributions from ‘after tax’ salary, for which a tax deduction may be able to be claimed,” Galbraith says. “For a person aged 30 on $60,000 a year and starting with a nil super balance, an additional $10 per week made as a personal after-tax contribution can lead to an additional $30,000 at the time of retirement.”
Buckley says putting aside 17 to 19 per cent during your early working years instead of the required 10.5 per cent to cover future absences from full-time work and take advantage of compound interest is a sensible strategy. “It sounds like a huge amount, but we need to focus on doing what we can, when we can. It’s never ever too late to start, but definitely the earlier you can start the better.”
If you own your own practice or are self-employed, paying your own superannuation is an important business expense, even though it’s usually not compulsory. “You should be prioritising super if you’re self-employed,” Buckley says.
She also recommends having only one superannuation account to reduce fees and make it easier to keep track of your funds. “It’s a very simple process now to consolidate.”
Checking your payslips to make sure superannuation has been paid and setting aside time once a year to check your fund’s progress and suitability are other effective strategies. “Ask yourself, ‘Am I paying too high fees? Am I happy with my investment returns? Is my risk profile still the same? Has the fund done something substantially different? How is my fund performing relative to others? Do I need to change?’” Buckley says.
Perhaps most importantly, Van Der Beek says confronting fear and apathy can help you focus on saving for a comfortable retirement. “The word ‘superannuation’ is an intimidating word. It’s not a fun word. It’s certainly not a sexy word. But it’s your money—no-one would ignore their bank balance.”