Women currently retire with almost 40 percent less super than men, while one-third of women retire with no super at all. Here's why that matters.
There’s a good chance you already know about the gender wage gap. Men get paid more than women—sometimes significantly more—for a number of reasons that definitely don’t need to exist. The good news is that the gap seems to be shrinking: currently, the difference in average full-time base salary between Australian men and women is about 15 percent, the lowest it’s been in 20 years. The bad news? After retirement things get much, much worse.
Women in Australia are currently retiring with just under two-thirds the superannuation of men. For those playing at home, that works out to be a difference of about $110,000 by the time the average person leaves the workforce at the age of 64, according to Industry Super Australia—and makes the “gender super gap” nearly triple the size of the wage gap.
The reason for the disparity might seem obvious: a lifetime of lower wages will inevitably result in lower super contributions and, ultimately, a much smaller nest egg. That’s definitely part of the problem. Financial inequality between men and women in the workforce will inevitably feed financial inequality after they leave. But there are a raft of other, more complicated factors that contribute to the superannuation chasm.
For one, there’s the matter of motherhood and the “maternity penalty”. According to a recent report by the Australian Institute of Family Studies, men were twenty times less likely than women to take on the role of a stay-at-home parent in 2016—indicating that women who want kids are far more likely to put their careers on hold so they can take care of things on the home front. Even if the average Australian takes just five years out of the workforce between the ages of 29 and 34, it’s estimated that the time off will knock about $100,000 off of their retirement savings.
Other primary drivers of the gap have to do with glass ceilings and uneven representation. Women are more likely to work in part-time or casual jobs than men, leaving them with less hours and lower super contributions; they are more likely to hold lower-paying positions such as those in administration, community services, and sales; while senior executive and board level positions are typically dominated by men.
Those losses add up over the course of 50 odd years, and the long-term consequences can be pretty grim. In a recent report titled “The Future Face of Poverty is Female”, researchers at Monash University concluded that “the current superannuation system benefits those who are able to work full time and continuously before retirement… Those who do not or cannot work like this are much more susceptible to retirement poverty.”
Since nearly half of Australian women rely on their partner’s income as the main source of funds for life after work, the issue of “retirement poverty” is particularly harsh for single women. In 2015, 32 percent of single retired females were living in poverty—as opposed to 16 percent of single retired males—and according to social justice group Baptist Care Australia the fastest growing demographic of homeless people is older single women. The proportion of women reporting financial stress was higher than men in all age groups in 2016, and female lone parents were the most likely to suffer from it.
So, what can be done about all of this? Well, for starters, the Government could make some changes. They could scrap the rule that those earning less than $450 a month from a single employer—women, mainly—are ineligible for superannuation, and they could start paying super on maternity leave.
Industry Super Australia head of consumer advocacy, Sarah Saunders, says it makes sense. “More and more people are working multiple jobs. Removing the threshold would give anyone over age 18 who earns a wage, no matter how small, the chance to build their retirement savings. The Government could also pay super on parental leave—something, Saunders says, is long overdue. “It’s astounding in this day and age that we still don’t pay super on parental leave.” In the interim, the Labor Party recently announced that they would do both of these things.
Beyond that, there are a few minor steps that young people can take to mitigate “super poverty” later in life and close the gap somewhat—if only marginally. For one, you can bolster your savings by making voluntary contributions and salary sacrifices early on in your working life and accruing some sweet, sweet compounding interest over the years.
“Every dollar counts and a dollar now is worth so much more than a dollar in 30 years’ time,” Sandra Buckley, CEO of Women in Super, told VICE via email. “The sooner you start saving for retirement the better, due to the advantage of compound interest.”
Sandra also suggests that people consolidate their super accounts and make sure they’re not paying through the nose on unnecessary fees; that they throw in a little extra each week above the Superannuation Guarantee (SG) rate; and that they talk to their super fund manager and pick their brain on sensible investment options.
“Ask questions such as, ‘What fees am I paying and what exactly am I paying for? Is my risk profile appropriate for me? What is the one, three, and five year investment track record?’ ”
These are small steps, admittedly, and will have little impact in the way of addressing the structural inequities that lie at the root of the problem. That’s why people like Sandra and other organisations are advocating for real action and government intervention: because without that, the super gap probably isn’t going anywhere.
“Women currently retire with 40 percent less super than men, and one third of women retire with no super,” she says. “This is unlikely to change over coming decades due to the particular challenges faced by women in trying to accumulate super.”
Meanwhile, Saunders believes change will arise from a long overdue push from the top. "It’s unacceptable that women are retiring with 40 per cent less super than men," says Saunders. “Simple things like adding it to paid parental leave could make a real difference. All we need now is the political will.”
This article was first published by VICE on 18 December 2018. The information referred to may change from the date of publication and care should be taken when relying on such information.