It’s not a myth. The gender super gap is a scary reality facing women across Australia, leaving them with thousands of dollars less than the average man at retirement age. However, there are some simple tips you can follow today that can help to bridge the gap between men and women’s superannuation balances.
What is the gender super gap?
The gender superannuation gap is the difference between women’s and men’s average superannuation balances. According to Industry Super Funds (ISF), women currently retire with nearly half (47 per cent) less super than men.
For the average Australian woman’s super fund, that is roughly $85,000 less.
This means that women (particularly single women) are at a much higher risk of poverty, housing stress and homelessness in retirement.
How does the gender super gap emerge?
As retirement balances are almost entirely determined by compulsory contributions based on 9.5 per cent of a worker’s salary, the superannuation gap is largely influenced by the gender pay gap.
According to the Workplace Gender Equality Agency (WGEA), the gender pay gap is the “difference between women’s and men’s average weekly full-time equivalent earnings, expressed as a percentage of men’s earnings”. Its latest figures show that there is currently a 21.3 per cent total remuneration gender pay gapfor full-time employees across all industries.
Women are also retiring less due to parenthood. A recent Australia Services Union (ASU) report noted that “in almost every aspect of the gender pay gap and the superannuation gap we find that being a parent is negatively associated with women’s pay and super while it is positively associated with men’s pay and super”.
“When couples have children, the woman usually takes more time off work than the man and she also is more likely to return to part-time work than full-time.”
How can we bridge the super gap?
For most young Aussies, your superannuation is an afterthought. But ensuring you’ve super-proofed your retirement as early as possible is crucial for women to help try to close the gender super gap.
#1 Consolidate your superannuation
All superannuation funds charge fees for their services. If you have more than one superannuation account – possibly created when you started your first job as a teenager – you could be losing your nest egg to multiple fees. Consolidating your super can help you to save on unnecessary costs by only paying one set of fees, as well as reduce the amount of paperwork you have and make it easier to track your savings.
Consolidating superannuation funds is a relatively easy process, and your main fund provider can often help with this. However, it’s important that you check if there are any exit fees involved and whether you have insurance with a fund before you make the decision to consolidate. Also remember to tell your employer so they continue to make contributions to the correct fund.
#2 Compare superannuation funds
Pay attention: superannuation fees are not insignificant. It’s important to compare super fees to make sure you are getting the best opportunity to save as much as you can for retirement. In general, the fees you could incur are; member fees, investment fees, insurance premiums, contribution fees or advisor fees.
Utilise comparison tools, such as tables and calculators, to find more competitive superannuation fund options. For example, there are a range of super funds on the RateCity.com.au database that charge investment under 0.10 per cent.
#3 Make additional super contributions
The Superannuation Guarantee ensures that Australians earning more than $450 a month (or those aged under 18 and working more than 30 hours a week) are entitled to 9.5 per cent of their pre-tax income being put into their nominated superannuation fund.
ASIC’s MoneySmart website says “your employer contributions alone are unlikely to be enough to maintain your current lifestyle when you stop work, but you can do your bit to grow your super”.
Talk to your employer about paying a portion of your pre-tax salary as an extra contribution towards your super. This is commonly known as a salary sacrifice, and it can be tax-effective if you earn more than $37,000 per year.
#4 Spouse super contributions
If you’re currently earning a low or no income, your partner may be able to make contributions to your superannuation fund and claim a tax offset in the process. If you’re comfortable with this, spouse contributions can be a useful tactic in closing the gender gap of superannuation lost to carer leave.
There are two ways partners can help your superannuation to grow:
- Making a Spouse Contribution to their super account
- Arranging for Contribution Splitting (also known as Super Splitting)
According to ISF, “spouse superannuation contributions can now be made for spouses earning up to $40,000 per year. If your spouse has earnings below $37,000 you can claim the maximum tax offset of $540 when you contribute $3,000 to his/her super”.
#5 Government Co-contribution
If you are a low or middle-income earner and making personal (after-tax) contributions to your super fund, the government may also contribute up to $500. This does not apply for those who have made contributions that have been allowed as a tax deduction. This can be a useful resource for Australian women who are working part-time or casual hours.
There are two co-contribution income thresholds, a lower threshold ($37,697 for 2018–19) and a higher threshold ($52,697 for 2018–19). For more information on Government Co-contributions, check out the Australian Taxation Office website.