Australia women continue to leave the workforce with significantly less in their retirement savings than men. So how can we help women create a more secure financial future? YBI explores the issue.
According to recent figures released by Australian Super, the gender gap in retirement savings is continuing to widen despite record female full-time employment and a rise in women’s earnings. In fact if the fund’s female members were to retire today they would have on average a third less savings than their male counterparts ($82k compared with $120k).
The fund’s figures match that of ABS data which suggests for the past decade the average super balance for retiring women has been 36 – 44 per cent less than that for men. Worse still an estimated 32 per cent of women aged 15 and over, have no superannuation. This is particularly high among the self-employed and small business owners.
But why the disparity? There are a few simple reasons. Women’s superannuation savings are impacted by a number of issues such as spending more time out of the full-time workforce caring for children and loved ones, and the gender pay gap which sees women earn less than men on average.
The older a woman gets the more the pay gap widens with ABS data suggesting the average super balance for a woman approaching retirement is over a $100k less than a man of similar age.
Yet it doesn’t have to be this way. Increasingly women are taking their financial futures into their own hands and acting to improve their retirement savings.
In 2018 the government introduced a slew of new measures that have the potential to significantly impact women’s super-savings.
Financy reports that rrom July last year, a new measure applied which allows for unused concessional super contributions to be accumulated over five years, provided the individual’s total super balance is less than $500,000.
While the annual limit on concessional contributions is $25,000, this loophole means individuals can make use of up to five years of previously unused contributions to ‘catch up’ on their super.
While women in retirement who need to boost their super may also benefit from the ‘downsizing into superannuation’ rule change that took effect in July 2018. This makes it possible under certain conditions for over 65s to top up their super by up to $300,000 by using the proceeds from the sale of their home.
This all bodes well for those women who already own their own home or have significant super invested. What of women who are lower income earners?
In 2018 the government extended the ‘spouse contribution tax offset’. This tax offset allows the higher earning partner in a relationship to make tax reduced super contributions on behalf of their lower earning partner, as long as the lower earner has an income below $40,000. While no solution, it is a stop gap to help boost some women’s super funds.
So, what more can be done? According to the Australian Institute of Superannuation Trustees (AIST), plenty.
In March the AIST announced a four-step plan they hope will assist in closing the gender savings gap at retirement for women.
AIST CEO Eva Scheerlinck, said with an estimated two out of five single women retiring in poverty, it’s time more was done. With this in mind the AIST has called for a number of initiatives for women’s super that it hopes to make election issues.
“The longer the government waits to address the gender savings gap, the more women will retire with inadequate incomes,” Scheerlinck said.
AIST’s four-step plan to help improve retirement outcomes for women involves:
The abolition of the $450 monthly income threshold for compulsory super payments; Paying super on paid parental leave –currently this is the only form of leave that doesn’t attract super; Providing low income earners, most of whom are women, with an additional super contribution as outlined by the Women-in-Super advocacy group.
Scheerlink says the group will also call for a firm commitment to move to 12 per cent compulsory super in accordance with the legislated timetable, which is very important to improve retirement outcomes for women.
While Scheerlinck said there is no quick fix to the situation, the AIST will be calling for these measures to be part of this year’s Federal Budget.