How Gender Dictates Your Financial Future: The Superannuation Gap

Gender plays a significant role in shaping financial outcomes in Australia, particularly when it comes to superannuation. Women consistently retire with smaller super balances than men, a disparity with serious consequences for financial security and independence in later life. Understanding the causes of this gap and the strategies women can use to boost their super is crucial for closing the divide and ensuring a comfortable retirement.

Why Do Women End Up With Smaller Super Balances?

1. The Gender Pay Gap

• On average, women earn less than men due to the gender pay gap, which directly affects the amount contributed to superannuation over a lifetime
• Lower earnings mean less money is set aside in super, and less compounding growth over time.

2. Career Interruptions and Unpaid Care

• Women are more likely to take time out of the workforce for unpaid care, such as raising children or looking after elderly relatives
• These career breaks result in missed employer super contributions and lost investment growth.

3. Part-Time and Casual Work

• Women are more likely to work part-time or in casual roles, which typically offer lower pay and fewer super contributions
• Only 42% of full-time workers are women, and part-time roles often do not provide the same super benefits

4. Employment in Lower-Paid Industries

• Women are overrepresented in industries that traditionally pay less, further compounding the super gap

5. Longer Life Expectancy

• Women live longer on average than men, meaning their (smaller) super balances must stretch further in retirement

6. Divorce and Relationship Breakdown

• Separation can disrupt retirement planning and may leave women with a reduced share of super if not properly negotiated

7. Systemic Issues

• Superannuation is not paid on government parental leave, so women miss out on contributions during maternity leave

Steps Women Can Take to Ensure Their Super Covers Their Needs

1. Start Early and Make Regular Contributions

• The earlier you start contributing to super, the more you benefit from compounding returns
• Even small, regular contributions can make a significant difference over time.

2. Make Voluntary Contributions

• Consider salary sacrificing (pre-tax contributions) or making after-tax (non-concessional) contributions to boost your super
• Take advantage of government co-contributions if your income is below the threshold—up to $500 extra per year for eligible contributions

3. Consolidate Super Accounts

• Combine multiple super accounts to avoid paying multiple sets of fees and to maximize growth
• Check for lost or unclaimed super using the ATO online porta

4. Review and Optimize Your Investment Strategy

• Choose a super fund and investment option that matches your risk profile and long-term goals. Growth strategies may offer higher returns over time
• Regularly review your fund’s performance and fees

5. Leverage Spouse Contributions and Splitting

• If your spouse earns more, they can contribute to your super, potentially qualifying for a tax offset
• Contribution splitting allows couples to balance their super and maximize tax advantages.

6. Catch Up After Career Breaks

• Use catch-up (carry-forward) concessional contributions if you’ve had years with low or no super contributions, allowing you to contribute more in subsequent years

7. Negotiate Pay and Seek Professional Advice

• Don’t hesitate to ask for a pay rise or seek roles with higher super benefits—more pay means more super.
• Consider professional financial advice to tailor strategies to your circumstances.

8. Plan for Major Life Events

• In the event of divorce or separation, ensure super is included in the financial settlement
• Consider downsizing your home in retirement and using the proceeds to make a downsizer contribution to super.

Conclusion

The gender superannuation gap is a complex issue rooted in pay disparities, career interruptions, and systemic factors. However, women can take proactive steps to boost their super balances and secure their financial future. By starting early and seeking professional advice, women can help close the super gap and ensure a more comfortable retirement and financial freedom.