Superannuation and the Gender Gap

Australian women generally have significantly less superannuation savings than men. The average Australian woman retires with around half the balance of the average man.

The facts are startling:

• Women’s super balances ‘flat-line’ between the ages of 38-42 and 43-47.3
• Only a small proportion of retired women live on incomes above $50,000 and more than half have incomes of less than $30,000.
• 77% of women rely on some form of age pension in retirement.

Superannuation is concessional taxed, making it the most tax-efficient vehicle for retirement savings and wealth creation. One of the biggest benefits of retirement savings through superannuation is compounding returns year after year. Compound interest is interest added to the principal of a deposit so that the added interest also earns interest.

Unfortunately, this means that as women’s superannuation balances fall behind, this disadvantage is compounded year after year.

In a traditional male working model, women receive lower wages than their male counterparts. Women are more likely to take time off to care for children and work part-time to juggle the demands of family life. This results in lower superannuation contributions and lower retirement savings.

Almost 35 per cent of women have no superannuation. Most women who will retire in the next 20 years do not have enough superannuation to allow a modest retirement – 55 per cent of women aged 45 to 54 had less than $25,000 in superannuation in 2009 -2010. These figures are even more worrying considering women generally live longer than their male counterparts.

Aside from earning more and contributing more, here are some strategies for women to boost their superannuation balance:

• Salary sacrifice: ask your employer to pay part of your pre-tax wage into your super fund.
• Make after tax contributions (non-concessional contributions) into your super fund.
• Spouse contribution splitting: your partner/ spouse can split 85% of his before tax contributions with you.
• Ask your partner/ spouse to make contributions on your behalf.
• Get a boost from the Government by utilising Government Co-contribution.
• Take advantage of Low Income Super Contribution.

It is important to understand how your superannuation fund is invested and to ensure you have the appropriate asset allocation in place. You may wish to seek financial advice, in which case, it is essential to find an adviser you can trust.

Just remember, every bit counts in the long run. That’s the power of compounding interest!