Fairer superannuation for women

Fairer super for women

Gender is under the spotlight. We’re witnessing a global movement that’s shaking up traditional perceptions of gender; women’s voices are getting louder and importantly are being listened to, heard and remembered. The gender pay gap is synonymous with equality and our current climate offers a timely opportunity to debate its impact on the super gap.

Super might not be everyone’s brew of choice and there’s certainly lighter bedtime reading out there. But the super gap is a big challenge that many Australian women will face. While retirement might seem like a lifetime away, the super gap is part of a larger socio economic debate and shouldn’t be put off or left last minute like a tax return!

Consider: the Senate Standing Committees on Economics recently reported that women retire on average with half the savings as men, and “are at greater risk of experiencing poverty in retirement”.

When it comes to super, what you do now affects future you - big time. To help, let’s look at what has created the super gap, why it happens and how you can ensure you have enough funds for the retirement you envisage.

What Is The Super Gap?

Simply, it’s the disparity in superannuation balances between men and women. The gap itself isn’t just a few hundred dollars - so here’s where it gets real.

In late 2017, the Association of Superannuation Funds of Australia (ASFA) reported that the average superannuation balance of Australians currently working was $68,000 for women and $112,000 for men.

For women and men that had retired that year, the average balance was $157,000 for women, and a far more impressive $271,000 for men. Talking super just got interesting, right?

What Causes The Super Gap?

Unfortunately there’s no specific cause. It’s a culmination of factors interacting over a vast period of time.

According to ASFA, the primary factors contributors are:

  • Reduction in employment for women while caring for children
  • The gender pay gap
  • Casualisation of the workforce
  • Longer life expectancy for women which stretches super funds further
  • Adequacy of superannuation overall

Employment Reductions | Pregnancy And Parental Leave

Parental leave and the time women spend away from work to raise their children, often referred to as the motherhood penalty, is critical to understanding the super gap.

A study by the Workplace Gender Equality Agency (WGEA) says that raising children accounts for a 17% loss in lifetime wages for women. This is because women take larger breaks for childcare responsibilities. On top of this, ABS research figures showing that 82% of women returning to work after childbirth return to part-time roles instead of the full-time roles they held prior to childbirth.

Playing super catch-up after a brief work hiatus, especially part-time, is near on impossible. 

The Gender Pay Gap

Organisations like WGEA release stats and figures around the disparity, like their 2017 Scorecard, an annual assessment of gender pay disparity throughout occupations and industries across Australia.

Reports like the 2017 Scorecard are very data heavy. While we’d strongly encourage you to explore it, the pertinent details are:

Casualisation Of The Workforce

As of 2017, the Australian Bureau of Statistics estimates that nearly a third of all employees now work on a part-time basis. Employment is shifting away from its traditional 9-5 status, towards a part-time and more casual basis with flexible work hours - work casualisation.

While this is great for today’s family unit, it raises an issue of lower incomes, less security, and the need to often have more than one job to support yourself, or your family.

David Taylor from the ABC reports that while Australia’s unemployment rate is quite low, there’s a rise in underemployment as full-time roles shift to part-time and casual.

The average weekly hours worked now stands at 34 hours and 40 minutes, down from 35 hours and 14 minutes five years ago.

The data for this graph comes from the Australian Bureau of Statistics.

While this issue affects both genders, it impacts women more because of accumulative disadvantages of the pay gap and the motherhood penalty.

Longer Life Expectancy For Women

Last year, The Australian Bureau of Statistics (ABS) released their life expectancy report that showed women will live an average of four years longer than men. Good news for women - longer life! In a superannuation context, this is bad news as you’ll need more in order to look after yourself for longer.

Adequacy Of Superannuation

If you’ve taken time off to care for children, gone back into part-time work and then are living longer than you imagined, the chances are your super is going to be inadequate.

Reviewing couples, and single male and female retirees, a paper published by John Evans, Director of the Centre for Analysis Of Complex Financial Systems looks at balanced and conservative superannuation investments matched with accurate employer contributions to deduce the sustainability of retiring with your superannuation balance.

Evans’ research concludes: “Our analysis indicates that those in the SGL system for around 40 years with an average retirement SGL amount could attain the ASFA (2016) modest standard of living in retirement, and those with a shorter life expectancy than average could attain a comfortable standard of living. But those who expect to live longer than the average can only expect to achieve a modest standard of living in retirement”.

Hold up, what are the ASFA’s standards of living in retirement? Essentially, the ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years.

There’s a difference between comfortable and modest. Comfortable allowing the retiree to engage in leisure activities, international holidays, good clothes, a good car and a range of other things like electronic equipment. Modest allow the retiree access to a basic living activities like weekly shopping, the odd domestic holiday and so forth.

This is the current ASFA budget for various households and living standards for those aged around 65:

(March quarter 2018, national)

 

 Modest lifestyle

 Comfortable lifestyle

 

Single

Couple

Single

Couple

Total per year

$27,368

$39,353

$42,764

$60,264

Is The Gap Getting Any Better?

Let’s recap:

  • On average women earn 22.4% less than men in full time employment
  • If they choose to have a child during their professional career then they halt their maximum earning potential by at least one year, but often more
  • When they return, they overwhelmingly return to part-time roles, either by choice or by availability, and thus receive lower pay for years
  • This loss in earning potential (the motherhood penalty), the gender pay gap, and the casualisation of the workforce that inhibits their careers before and after children all add up to nearly half the average superannuation balance of a man

ASFA’s Director Of Research, Ross Clare, says that superannuation balances have increased substantially from 2011-12, but importantly the gender gap isn’t closing fast enough.

During that time, men averaged $83,000 and women $45,000. In 2015-16 those figures rose to $112,000 for men and $68,000 for women. A difference of nearly $45,000.

Average superannuation balance by Gender and Age

What’s Being Done About It?

Lots but there’s definitely much further to go. To help, ASFA is pushing the following recommendations in order to address the super gap:

  • Lift the rate of Superannuation Guarantee to 12%
  • Remove the $450-a-month threshold for the Superannuation Guarantee
  • The Superannuation Guarantee should apply with respect to all substantive income replacement payments eg parental leave
  • Allow employers to contribute more to super for women without being considered to have breached anti-discrimination legislation
  • Make super compulsory for the self-employed
  • Ensure employers’ compliance with the Super Guarantee rules is improved

Currently, the superannuation guarantee is set to rise to 12%, but is currently capped at 9.5% until 2021 where it will raise to the new figure at a rate of 0.5% until hitting 12% in 2025.

Aside from that, there have been a number of changes to Australia’s superannuation legislation, including preservation age changes, an increase in income threshold for spouse superannuation contributions, and the introduction of a first home super saver scheme.

What Can You Do To Maximise Your Super?

There’s actually a variety of realistic ways you can maximise your super so you can retire as you’d hope.

While not every situation will allow you to take these measures, there will be something on the below list that you can implement:

  • Voluntary contributions - These are contributions that you make to your own super balance outside of the compulsory employer contributions
  • Spousal contributions - If you’re a stay at home parent due to your partners breadwinning career, then they are able to supplement your super by making payments to your super fund
  • Controlling your investments - It’s important to choose a super fund that allows you the visibility and control over the way your super is invested
  • Fees - Administration and other fees a necessary part of every super fund. To ensure you’re receiving the lowest fees (proportional to the services received) compare the super funds in Australia

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, the ‘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.

Plus, we’re jargon free. You don’t need a finance degree to understand your options! With clear, simple and effective super advice available at no extra cost, you can 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.