Why Your Super Isn’t So Super

Behind Closed Doors managing director and founder Donny Walford

So you’ve shopped around for the best performing superannuation fund, and you’ve consolidated all your accounts – but have you considered the effect of the gender superannuation gap on your retirement?

The current gender pay gap in Australia means that women currently retire with an average of 47% less super than men.  This gap can drastically reduce the quality of your life when you need it most.

Founder and MD at behind closed doors, Donny Walford, is calling for a bipartisan approach to address the issue, and has submitted a white paper to the South Australian government. 

What is the gender superannuation gap?

The current gender pay gap in Australia is 15.3% (as calculated by the Workplace Gender Equality Agency). It is a significant number, and when you drill down to the superannuation gap, it just gets worse.

Women currently retire with an average of 47% less super than men. For the average super fund, that’s $85,000 women are missing out on. This gap can drastically reduce the quality of life for older single women. In 2012, approximately 40% of single women in retirement were living in poverty, as well as having a higher dependency on the age pension than men. Sadly, the fastest growing group of homeless people is older single women.

It will take 40 years before working women build superannuation for retirement, from entering the workforce to retirement.

Why is the super gap so large?

For the last two decades, the gender pay gap has hovered between 15% and 19%. A lifetime of lower wages for women results in fewer and lower super contributions, plus they miss out on compounding returns.

The money you save by making pre-tax contributions to your super, otherwise known as tax concessions, are structured unfairly. The top 20% of income earners receive the lion’s share of tax concessions. But the bottom 30% of income earners, who are mostly women, get next to nothing. Overall, women receive just a third of all government tax concessions.

There’s a number of other factors that contribute to the gender Superannuation gap:

  • Women are more likely to pause their careers to become the primary carers for their family. By missing just five years of work from age 29 to 34, the average woman is estimated to miss out on almost $100,000 of their potential retirement savings.
  • A majority of part-time and casual workers are women, leaving them with less hours to earn money and build superannuation.
  • Administrative, community services and sales roles are disproportionally filled by women, which tend to pay less than male-dominated occupations.
  • Fewer women occupy senior executive and board level positions, which tend to be better paid.
  • Women typically retire earlier than men, on average, yet live longer than men (for a female born today, that’s up to 4.4 years longer).

So what needs to happen to close the super gap?

The onus shouldn’t be on women to fix the problem, especially when most don’t have the means to do so. Australian women need real change to occur. For that to happen, government intervention is required, and inaction only allows the gender superannuation gap to grow larger every year.

The Government can start closing the gender superannuation gap by:

  1. Increasing the annual concessional contributions cap from $25,000 to $50,000 for women.
  2. Removing the rule that those earning less than $450 a month, who are mostly women, don’t get superannuation.
  3. Start paying superannuation on parental leave, like all other types of leave.
  4. Make sure there are no further delays in increasing employer superannuation contributions to 12%.
  5. Address the gender pay gap by paying women the same salary as men, doing the same work.
  6. Cap men’s salary until women are paid the same salary for same work.

Five years ago, 74% of the SA public service were women but only 28% held senior management roles. In 2019, 49% of Executives are women in 2019.

Pay gap leads to 19.3% annual super shortfall for full-time women.

* The superannuation contribution gap is based on 9.5% mandatory contributions as of July 2014.

Businesses and employers can start closing the gender superannuation gap by:   

  1. Paying women the same salary as men, doing the same work.
  2. Cap men’s salary until women are paid the same salary for same work.
  3. Pay superannuation while women are on Parental leave.

Homeless Women

According to analysis of Census data by the Equality Rights Alliance, between 2011 and 2016 the number of homeless people in Australia rose from more than 102,000 people to more than 116,000. That’s an increase of nearly 14 percent.

However, during this same period the number of homeless women over 55 years old increased by 31 percent. Even more alarmingly, the number of homeless women aged 65 and over saw an increase of 51 percent.

In addition, older women make up more than 56 percent of people receiving homelessness services – a further 61 percent go unassisted.

This red flag doesn’t tell the whole story. Most older women who find themselves homeless don’t sleep rough or access support services – so they aren’t easily counted. A 2014 University of Queensland report commissioned by the Mercy Foundation, indicates homeless older women are therefore “likely to be statistically invisible in data systems.”

The report suggests these women “are more likely to be staying with friends, living in a car, living under the threat of violence in their home or physically ‘hiding’.” Therefore, this alarming data is probably a grave underestimation.

“The largest proportion of older women presenting with housing crisis in Australia have led conventional lives, and rented whilst working and raising a family. Few have had involvement with welfare and support systems,” the Mercy Foundation study states.

Felicity Reynolds, CEO of Mercy Foundation said: “This should be setting off alarm bells for the policy makers because this is only going to get worse as affordability gets worse,” she said.

In addition, lower socio-economic women rely heavily on Centrelink for income, particularly in retirement.

What is behind closed doors doing to address the problem?

behind closed doors aims to help build the financial capability of women to ensure greater economic security for both women and their families, now and into the future. Greater financial capability, including financial literacy, has a direct link with boosting women’s economic participation, including building women’s retirement incomes and savings.

High-quality financial capability education can make a very significant difference to women’s lives. Our financial capability programs assist women achieve financial wellbeing which in turn helps reduce vulnerability to financial stress and other problems, such as family violence.

If you’d like more information on our financial empowerment workshops, email us at info@behindcloseddoors.com

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