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Why the gender super gap is a bigger issue than we thought

Yahoo Finance contributor
·Contributor
·5-min read
The gender wage gap will only worsen as our economy recovers. Source: Reuters
The gender wage gap will only worsen as our economy recovers. Source: Reuters

I wish I knew at 25 what I know now; that simply being a woman and having children would leave me with less money in retirement than if I was a man.

The gender gap in the Australian superannuation system is a real issue that sees women financially disadvantaged in retirement.

Covid-19 may have slowed this gap momentarily, but we expect the gap may expand again as the economy recovers, creating even greater urgency for solutions to the retirement realities challenging Australian women.

Thankfully, progressive companies are beginning to change this by continuing to make super contributions during maternity leave.

I’m grateful that my current employer has this policy. Back when I had my first child it was a very different story.

Starting a family makes you financially deprived

My oldest daughter, Amelia, turned sixteen in October last year. I was 25 when she was born and just starting my career in financial services.

In those days it was a much shorter paid parental leave period. It was also very challenging to take time off work and there was a stigma around it.

But when you’re young and you’ve just had your first child, retirement is the last thing

on your mind.

Sixteen years on and it has had an impact on my super balance.

I have three daughters now and am much more established in my career, but there remains a gap in my retirement savings due to the gender divide.

My story is not unique. Millions of Australian women choose to start a family and are financially deprived in their later year because of it.

The simple fact is that women still are not given the same advantages as men when it comes to superannuation. The past 12 months has have seen this major issue only get worse.

Covid-19 has widened the gender super gap

Our research series launched in 2020 looking into the retirement realities of Australians confirmed that while Covid-19 has shaken retirement plans for many Australians, women felt the financial impact more than men.

Nearly half (45 per cent) of Australians are either scared or do not feel financially very confident about retiring.

A third of women do not feel confident about retiring compared to men (33 per cent versus 25 per cent) as they have been able to save less during the pandemic.

While women are more willing to reduce spending compared to men (53 per cent versus 46 per cent), the reality is a third of women (32 per cent) surveyed do not have an investment portfolio outside of super, compared to just 17 per cent of men, potentially leaving them with less income after retirement.

This is a wake-up call. The gender gap in the Australian superannuation system is a real issue that sees women financially disadvantaged in retirement. It was an issue before the COVID crisis, and it is proving to be an even bigger problem today.

How women can improve their retirement nest egg

This year we delved into our own member data to see what action Australian women are taking or can take to improve their retirement realities.

What we discovered was an even greater sense of urgency; overall, the gender super gap has further widened from 14 per cent (2016) to 16 per cent (2020).

Not only the average super balance for men was consistently higher than women ($110k vs $93k in December 2020), but the rate of growth was also faster for men.

Contrary to the popular belief that Australia is inching towards closing the gender super gap, the data showed that the gap further widened to 16 per cent (vs 14 per cent in 2016).

While more men accessed their super early during the pandemic, the impact on average super balances of women was profound (16 per cent vs 13 per cent for men) because of the lower base for women.

These findings, taken directly from our own members, should be considered alongside common misconceptions about retirement. There is a major difference between what people think they can live on and what they need to live in a dignified way in their senior years.

ASFA research indicates the median balance of Australians aged between 60-64 is $154,453 for males and $122,848 for females, compared to a targeted balance of $545,000 for a comfortable retirement standard. The gap is undeniable.

Education and financial literacy play a key role

Women would benefit from further initiatives and incentives to make additional contributions to super to ensure they have adequate retirement savings.

Specific measures include mandating super contributions on paid parental leave and removing the $450 per month threshold for superannuation to be paid.

This will also improve the retirement savings adequacy for low-income earners and casual participants in the workforce who often hold multiple jobs, many of whom are women.

Educating younger Australians about their finances is critical. But as a mother of three children I also understand how challenging it can be – kids just aren’t interested in superannuation!

Children typically find financial matters boring, overly complex and irrelevant.

Particularly superannuation. But at the end of the day, super is just a fancy name for savings to be used when you stop working.

I’ve recently started discussing personal finances with my children in a way that makes it more relevant to them. The importance of saving money is a good place to start.

My daughters wouldn’t see the value in saving for a house or a comfortable retirement, but my eldest is keen to discuss saving for a car or a gap year.

I think there is much more work that we can be doing in schools and universities to educate younger Australians about superannuation.

Removing the jargon around super and simplifying retirement savings is the best way to get cut through with younger generations.

The superannuation industry and the government must unite to create a system that closes the gender gap for good and provides all Australians with a comfortable retirement.

I want to live in a world where I don’t need to teach my daughters why they won’t retire as comfortably as men.

Kelly Power is the General Manager at Colonial First State.

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