Super-for-women

Recent decades have seen huge gains made in the financial empowerment of women. However complete financial equality won’t happen soon with some saying that the pay gap won’t be breached for at least 50 years. So what are the areas where women lag financially, and what can be done to address the difference in super for women?

4 key issues

  • Gender pay gap. Across all industries, including those in which female workers outnumber males, men are, on average, paid more than women. For non-managerial clerical workers the gap is relatively small at 8.8%, but in key management positions women receive 26.6% less than their male peers. Large gaps also occur in the legal and medical professions.
  • Lower superannuation balances. While the pay gap is one reason why women have less in superannuation savings than men, another big contributor is time out of the workforce to raise children or taking care of other family members. Of 20 OECD countries, Australia has the third lowest employment rate for mothers, particularly sole parents.
  • More expensive disability insurance. While pure life insurance is cheaper for women, income protection and disability insurance is more expensive. This is because women have longer life expectancies than men, but they make more claims, and for longer periods, on both temporary and permanent disability policies. For trauma insurance younger women pay more than men of the same age, and older women pay less than their male counterparts. Future advances in medicine may help to even out these differences.
  • Being single. Single women (and men) lose out on the financial economies of scale enjoyed by cohabiting couples. About 24% of Australians live in one-person households, and across all age groups, 55% of those living alone are women.

Focusing on super

While it will take social and political change to redress the financial imbalances between the sexes, there are some things that women can do to improve their long-term financial position:

  • Understand the situation. If you are planning on taking time out of the workforce, what are the implications? As an example, 35-year-old professional Simone earns $120,000 per annum and has a super balance of $60,000. She plans on having three children and expects to be a full-time mum for seven years before returning to full-time work. As a result she may likely have around $77,450 (17%) less in super at retirement at age 67[1] than if she didn’t take time off.
  • Consider the options. Simone’s partner could plug some of this gap and potentially receive a tax benefit each year by making spouse contributions to her super fund while she is out of the workforce. This isn’t an option if Simone is (or becomes) single.

Another possibility is to increase contributions upon her return to work. If Simone salary sacrifices 2.9% of her pre-tax income to super, she could wipe out the estimated shortfall by the time she retires.

She could also consider changing her investment strategy or delaying retirement.

Planning is the key

While it isn’t fair, the reality is that women, particularly single women, face greater financial hurdles than men. Planning for the range of scenarios is essential. To make sure you’re on the right track with insurance, superannuation and saving, talk to your licensed financial adviser now.

[1] Calculated using the Career Break Super Calculator available at www.moneysmart.gov.au using default settings.


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