Bridging the super gap for women

Bridging the superannuation gender gap

‘Mind the gap’ has never felt so resonant. Via Hollywood and celebrity, the gender pay gap has been seeping into our news feeds more and more recently, amplifying the need for lively debate about the need for change, meritocracy and negotiation tactics.

Beyond the gender gap - but closely related - lies the super gap, and this particular gap has its own set of financial and social challenges. Statistically, we know that women retire (on average) with a super balance of $114,000 less than menand are more likely to retire into poverty.

It’s shocking but this statistic is an example of what makes the super gap one of the most talked about issues facing Australian women today.

To help, we’ve put together detailed statistics, links to valuable resources and interviewed prominent Australian commentators about super, and we’ll look at how all the stats and information relate and equate to your day-to-day life. And importantly: what you could do to close the gap.

What is the super gap?

Here’s the conundrum: As of February 2018, 46.9% of the working population are women, yet the sizeable differences in average super balances mean that women are more likely to retire in poverty.

In 2017, the Association of Superannuation Funds of Australia (ASFA) analysed the superannuation balances of men and women aged 15 and up. We’ve drilled down into the report to find:

Employment Status

Men’s Average Superannuation Balance

Women’s Average  Superannuation Balance

Currently Working

$112,000

$68,000

Retired

$271,000

$157,000


Super balances for both genders have grown exponentially since 2012 , however closing the gap is not being addressed at the rate it should be.

What has Caused the Super Gap?

Without over simplifying it, the super gap has been caused by women earning less than men - over much of their working lives. Unfortunately, the knock-on effect is years and years of lower super contributions. It’s a complex issue, steeped in historical gender bias towards men, that ultimately requires a shift in thinking away from traditional systems.

There is more to it than that though. The ASFA explored the causes in a paper called Women’s Economic Security in Retirement which outlined five factors contributing to the superannuation gap:

  • The gender pay gap
  • Employment reductions because of responsibilities like maternity leave
  • Workforce casualisation
  • Women’s increased life expectancy
  • The traditional superannuation system

How These Factors Relate

While historical gender bias lies at the core of the super gap, it’s important to note that it’s the interaction and interplay of these five factors over a significant amount of time that has led to the super gap. 

The Gender Pay Gap

The Workplace Gender Equality Agency (WGEA) reports on key differences in employment between genders. The key findings from the February 2018 WGEA report show:

  • Women working full-time earn an average of 15.3% less than their male counterparts. (This figure is for base wages only and doesn’t include any salary-packaged extras)
  • The gap increases with age: women 20 and under average at a 5.7% gap, while women in the 45-54 age bracket experience an average gap of 20%
  • High level executive positions display the highest average gap of 24.9%

Superannuation

Your super contributions are made based on a percentage of your wage, which currently sits at 9.5%. When women earn less than men for performing the same roles, they are therefore also paid lower super contributions.

Earning Potential and Workforce Casualisation

Women are also likely to experience circumstances that reduce earning potential even further. The main factors are centred around women historically being primary caregivers:

  • maternity leave
  • superannuation payments not required in parental leave periods
  • challenges of balancing work and childcare

Maternity leave

It’s not unusual for women to take a significant leave of absence from the workplace to give birth and then become the primary caregiver for their children. While it’s common to take 12 months maternity leave, this can be shorter or longer depending on individual circumstances.

Of course, men also take parental leave. However, a 2014 report by WGEA showed that 99.4% of primary caregiver recipients (ie. government benefits) were women, while employer-funded parental leave allowances showed that manger and non-manager recipients were 91.6% and 95.6% women respectively.

Are superannuation payments required in parental leave payments?

As of July 2018, The Department of Human Services states that superannuation is not required to be included in parental leave payments. The parental payments total $719.35 per week before tax (gross payments) for 18 weeks.

This amount is paid by the government, firstly to employers who then pay the employee. For many, organisations, these may be the only payments made. Others may have parental leave policies that provide for additional payments to be made along with the government payments. 

Challenges of balancing work and childcare

Women face difficult decisions around how they manage regular employment and the care of their children.

The ABS estimates that 82% of women who return to work after childbirth do so on part-time, casual, or more flexible working arrangements that provide less income but are necessary to balance both professional and family aspirations. This figure contributes to one third of Australia’s workforce that are now employed on a part-time basis.

For women, and Australia’s workforce, the balance is critical. But the knock-on effect it has on women’s earnings is a stark reality both in the early years of raising a family, but also at the time of retirement. .

Life Expectancy on the Up

With advancements in technology and medicine, life expectancy is increasing and it’s women who will live the longest.

The ABS notes that life expectancy for people born between 2014 and 2016 is 80.4 years for males, and 84.6 for females. In 1971, it was 68.3 years for males and 74.8 for women. While life expectancy has increased significantly over the last 45 years for both genders, women have lived longer at every interval over the past 50 years.

Life Expectancy Chart
Image Source

 

With women living longer, it goes without saying that their superannuation balances must also last longer in retirement than men’s.

Perception and Experiences of the Super Gap

Kylie Travers

Bianca Hartge-Hazelman

Conrad Liveris

While statistics are a good reminder of the current situation for women today in Australia regarding their super its important to look at what you can do to start building your super today.

We recently met with three fantastic Aussies, Kylie Travers, Bianca Hartge-Hazelman, and Conrad Liveris to discuss their perceptions and experiences of the super gap.

Kylie has overcome incredible hardships including domestic violence, illness, raising two daughters with learning disabilities, and homelessness. Now, at 32, Kylie is a CEO, published author, motivational speaker, consultant, and worthy recipient of a slew of awards and nominations.

Bianca is founder, CEO and editor of Financy, “an online women’s money magazine which represents a movement towards women living their best, most fulfilling lives through achieving their money goals”.

Conrad is a corporate advisor for workplaces and risk, and is a specialist in restructuring, employee remuneration, HR policy, and recruitment. He has written for publications across Australia, Asia and the US, and chairs a series of arts, health and community service non-profit and government groups.

Q1 Virgin Money: How do you feel about the current super gap in Australia?

Kylie Travers (K): Sadly, it doesn’t surprise me. One of my biggest concerns with it is when you look at the statistics, the growing rate of older women who are homeless and dependent on inadequate Government assistance.

When you combine decades of wage inequality, the fact women have more time out of the workforce than men to care for any children with a lack of education and understanding about superannuation, finance and compound interest, this gap is the result. The super gap issue need to be tackled by both men and women if we want it to change.

Bianca Hartge-Hazelman (B): I’m optimistic that things will improve in the future but if I’m to be honest about the rate of progress and where we have come from, then I think it’s a sad reflection of the struggles of women in underpaid industries and the lack of recognition for the massive amount of unpaid work women do for their families and society.

Conrad Liveris (C): After a lifetime of care, and usually scattered and low-paid work, women are retiring into poverty. That’s not right.

Q2 Virgin Money: Australia ranks 46th in the Global Gender Gap. In your opinion, why does Australia lag other countries and how do you think this impacts women’s ability to save for their future?

K: Lack of education. On top of an undereducated public, superannuation and finances aren’t included in the school curriculum properly. It is generally considered to be taught at home or you figure it out yourself.

Relying on welfare. Millions of Australians are veterans, single parents and people living with disabilities who rely on Centrelink to survive. It is extremely difficult to go from Centrelink to a job and gets harder the longer you are on it. The longer you’re on it, the less you have going into superannuation.

Divorce. Most women I know or who have spoken to me at events spent years raising children with no superannuation accrued, then in order to have full custody of the kids, they signed away all rights to the superannuation in their husband’s fund and they have to start over.

Women spending time out of the workforce. Typically, it is the woman who stays at home with the kids, sometimes for over a decade and usually between the ages of 20 and 35. By the time women enter the workforce again it is usually at lower paid positions than males the same age, plus they are playing financial catch-up.

Childcare is pitted against the woman's income instead of being viewed as a family expense. When looking at going back to work, most families compare the cost of childcare against the income the woman will bring home.

B: Australia has a male dominated workplace culture at the top and still in many families from a breadwinning point of view. While this is slowing changing, women also have a tendency to put themselves last and this needs to change. Women also need to take the time to better educate themselves and their daughters about money and making smarter decisions for their futures.

C: Women’s economic opportunity struggles because of the competing demands on their time, as opposed to men’s, and the nature of work they tend to find themselves in. While the caring professions are dominated by women and are lower paid, the rising number of women in other fields, like law where the majority of lawyers are women, are in more junior roles and exempt from higher salaries.

Consistently, the superannuation gap emanates from a frustrating and complex mix of factors that have no silver bullet. Women’s opportunity is limited through structural and societal factors, which can lead to precarious retirement.

Q3 Virgin Money: Do you believe the Gap relates only to gender or should this be considered more broadly?

K: We need to consider it more broadly. We have more men being stay at home dads, we have a variety of relationship styles yet everything is still viewed from the heterosexual lens with a man and woman and often based on the woman taking time off to have kids. If we look at the causes for wage gaps (which include gender, race, religion and so on), combine it with gaps in the workforce due to parenting and lifestyle choices, the gap in super becomes more than simply a gap between men and women.

B: The gender gap needs to be the focus, but parenting is a huge part of this. Women who don’t have children or don’t take big career breaks tend to do better financially.

C: Gender is easy to calculate because the data exists, there is clarity. Age is an important part here, which is due to the changes in the Australian economic system in the past 50 years. Some women are slightly out of reach of some benefits that women months older than them can access.

Race, too, is important. Australia has not always been a land of opportunity for new migrants who have often been relegated to less secure work.

Q4 Virgin Money: In Australia, the super gap (and pay gap) is expected to close in 50 years. Do you think this is realistic? Why?

K: Listening to my daughters, they have a different view on women, money, work and independence than I did at the same age, so yes, I think it is possible. The more we educate the next generation (and current ones) the smaller that gap gets.

B: I would hope that it would close much sooner. The more attention that is draw to these issues and the more push back from women, the faster change can be made.

C: Closing the superannuation gap may happen at the headline level, but women will be more susceptible than men to lower retirement incomes. For the superannuation gap to close we need to see men and women share care more evenly and for women to have the same workplace opportunities to men, that isn’t happening today and so closing the retirement gap is unlikely to occur in my lifetime.

Q5 Virgin Money: Do you think women are paid less than men for doing the same job? If so, why might this be?

K: Women typically don’t negotiate as hard as men. A woman standing up for herself is seen as being bossy vs a man being seen as management material. The lack of transparency around incomes, wages, jobs and expectations contributes to this issue. Lastly, the assumption all women want to have babies or will leave to have kids means they get offered lower salaries and are viewed as less reliable, albeit often subconsciously.

B: We know this is the case. 2017 blew the lid off this in many industries especially media and sport.

C: The data is clear: women are paid less than men for the same work. In my own work looking at gender pay gaps I constantly see women being paid less than men for the same work. Excuses abound, but it happens and it isn’t right. The way work is valued is flawed - outcomes are more important than length of service.

Q6 Virgin Money: What can women do in 2018 to help manage and build their super? What can couples do to help collectively growth their super?

K: Get proper financial advice based on your circumstances then plan accordingly. Look at when you want to retire, the lifestyle you want, how long you expect to live for and how much money you will need. Create a plan and carry it out.

If you are a couple, do it equally. Plan your retirement together, but have things in both names equally.

Everyone should be aiming for financial independence and to be able to retire early. This means, getting the right financial advice, planning well, doing what you can to be secure so you decide when you retire and the lifestyle you have instead of having to work until you are 70 then struggling to live.

B: Women need to start paying themselves super on maternity leave, and this might involve splitting super with a spouse. I have always done this.

C: If you can, contribute more than the legislated minimum to your superannuation. An extra $20 a week is an extra $1,000 a year.

Q7 Virgin Money: How do you think women can navigate the workplace in 2018?

K: Communicate with superiors, peers and anyone you work with. Learn about wages, workloads, what is required at different levels and decide on your career path then find the right mentors and follow your plan to make it happen. Ultimately, you get to decide how your life turns out, no matter what obstacles you face.

B: Be more demanding of better pay, and believe you deserve it.

C: See what is working in your workplace and industry that helps people be successful - a model always helps in career success.

Q8 Virgin Money: What government support is available for women and super?

K: There is the co-contribution for low income earners and lots of information online women can use to educate themselves.

B: None. There are some tax incentives to split super or add to super for low income earners.

Q9 Virgin Money: Are there any resources you would recommend women check out? What is your number 1 must read or piece of advice.

K: Know exactly what is happening with your money and create a plan for it. My recommendation is to do this 21 Day Money Challenge which covers every area of your budget, ways to make and save money but on the first day it covers consolidating and looking for lost money including superannuation.

B: Get financially engaged, read your statement. Check your fees. Calculate your balance and how to build it. Read more on women’s money matters and find the people that can help you get better educated.

C: Invest.


Want more Q&A with our guests? Read the full interview.

 

Bridging the Superannuation Gap

Ways to build your super

1. Make Voluntary Contributions

If you’re keen to make voluntary contributions, these can be done in a variety of ways.

Concessional contributions include:

  • Salary Sacrifice: requesting your employer contributes additional amounts from your salary pre-tax
  • Tax deductible contribution: directly contributing to your super fund claiming the tax difference through your tax return. You’ll have to let your super fund know if you intend to claim a deduction on a contribution. FYI, you can make up to a total of $25,000 in concessional contributions in a financial year

Non-concessional payments are made after tax, so they don’t require approval or agreement from an employer. The non-concessional cap is $100,000 per financial year. If you’re aged 65-74 then you can still make these payments provided you meet the government's work test.

2. Spousal contributions

If you’re married or are in a de facto relationship, Spousal contributions are another avenue to explore should you have a partner that will be working during your maternity leave.

These payments count towards the contribution cap of the paying spouse though, so if they’re making voluntary contributions to their own super they made need to alter the percentages that go to each.  Should you match the criteria, the contributing spouse may also be able to claim a $540 tax offset - it’s definitely worth checking.

3. Find Lost Super and Consolidate

Are you one of the (approx.) 5.92 Million Australians with more than one super account? And do you know if you have any lost super currently sitting with the ATO?

Having more than one super account means multiple fees, potentially multiple insurance policies that will be eating into your retirement savings.  Consolidating into one account means you have one set of fees, one insurance policy .avoiding paying multiple fees and helping manage your savings all in one place.

There’s no doubt that super research and prep can take a while to get your head round.  It’s a good idea to start thinking about what steps you need to take and/or consulting a professional to ensure that you receive the best possible solution during your maternity leave. 

Super and parental leave

When it comes your own super, you shouldn’t feel powerless about closing the super gap. If you’re family planning, there are a few options that you should consider.

Firstly, find out exactly what your entitlements are with your employer and with the government. Many organisations are making the switch to paying superannuation during maternity leave.

Also, did you know you can check your eligibility for paid parental leave with the Department of Human Services? Eligibility is dependent on your current living and earning circumstances.

Once you’ve checked what you’re entitled to from your employer and the government, you can consider making contributions to your super as well or in place of those payments.

What Can Businesses Do?

There’s an opportunity for businesses to embrace positive change and make a difference for the better.

In an attempt to make action happen and encourage other companies to make them too, the WGEA released Employer of Choice for Gender Equality (EOCGE) citations for businesses proving to be taking meaningful steps towards equality.

Additionally, businesses are being encouraged to review the culture of face time and overwork as it negatively affects women. The New York Times detailed studies in the USA that have shown a positive correlation between businesses that offer flexibility with lower gender pay gaps.

Ultimately, businesses have the ability to introduce positive change into their everyday working environment, to their recruitment processes and career plans. Aside from those mentioned above, here are just two recommendations for your business to consider:

Faster Than 50 Years

The superannuation gap is a complex issue as its contributing factors are all connected to a women’s entire life - before and after employment.

There is no immediate solution but there’s certainly steps we can all take towards equality in the next 50 years. This starts with a conscious societal shift from both women and men, stronger recognition and action on leave entitlements and flexible work arrangements and political coverage and pressure.

To ensure you’re prepared for your parental leave, explore our superannuation information to see if you’re getting the most from your super fund, and delve into our blog for helpful resources and advice.

What Are We Doing To Help?

We’re keen to help out however and whenever we can because we understand the challenges of the super gap. Through Virgin Money Super we offer a range of product features and services to support working women. These includes offering one of the lowest fees in the market, our ‘baby break’ fee reduction for a period of up to 12 months while you’re on parental leave, and giving you complete control of your investment options.

We also offer all of our customer’s access to general advice over the phone with qualified financial advisors help you manage your super at every stage of your life, at no additional cost.  You can call as often as you like allowing you to plan your future with confidence.

Learn more about Virgin Money Super now and start building your super to ensure you have enough super at retirement.  Why not get started today and find out how much super you might have in retirement based on your current situation.

Important Information

This information is of a general nature only and does not take into account your personal financial situation, needs or objectives. Please consider your own personal financial circumstances and consider the Product Disclosure StatementProduct GuideInsurance Guide and Financial Services Guide before taking any action in relation to your superannuation, making a contribution, or asking your employer to contribute to Virgin Money Super for you. You should consider the suitability of superannuation and Virgin Money Super’s Product Disclosure Statement before making a decision on your superannuation investments, making a contribution, or asking your employer to contribute to Virgin Money Super for you. For further information about the insurance options refer to the Insurance Guide.

It is very important to note that superannuation is generally a long term investment. Past investment performance is not a reliable indicator of future performance and should never be the sole factor considered when selecting a fund.

Before you rollover or consolidate your superannuation, you should check to see if insurance or other benefits will be impacted or lost. Some funds may also charge withdrawal or exit fees. You should consider the relevant Product Disclosure Statement. Please note this information does not constitute personal financial product advice, and you may wish to consult your financial adviser before making a decision about whether Virgin Money Super fits your objectives, financial situation and needs.

If you are considering making voluntary contributions into your Virgin Money Super account, you should consider your personal circumstances, the impact of such contributions to your contribution caps, as well as associated taxation issues before making any decision on making voluntary contributions. Concessional tax rates do not apply on contributions which exceed government contribution limits. See the ‘How Super is Taxed’ section of the Virgin Money Super Product Guide and the contribution fact sheet on our website for more information about contribution types and limits.

Prepared by Virgin Money Financial Services Pty Ltd ABN 51 113 285 395 AFSL 286869 (‘Virgin Money’). Virgin Money Super is a plan in the Mercer Super Trust ABN 19 905 422 981. Virgin Money Super is issued by Mercer Superannuation (Australia) Limited (MSAL) ABN 79 004 717 533 AFSL 235906 as trustee of the Mercer Super Trust. For more information about Virgin Money Super, please refer to the PDS which is available free of charge on our website or by calling the Customer Care team on 1300 652 770.