BEGINNERS GUIDE TO SUPERANNUATION
Women and superannuation
The experience of women in the super stakes deserves special comment. Women are seriously under-represented in the super stakes. The reasons for this are quite obvious: women spend less time in the paid workforce, due to being primarily responsible for child-care and experiencing earlier retirement ages. Women usually have lower incomes than their male counterparts. They are also less likely to regard themselves as being responsible for their own retirement planning and more likely to spend their incomes on current consumption for themselves and their families.
The Australian Bureau of Statistics (ABS) says 49% of women expect super to be their main retirement income, compared to 56% of men; 18% of women expect to rely on their partner’s income, compared to just 4% for men; and 27% of women expect the old age pension to be their only retire income, whereas it’s just 25% for men.
The OECD estimates that Australian men are in the paid workforce for 38 years before retirement, which is almost twice the women’s equivalent of 20 years. There are also significant differences in pay rates (in 2012 women were paid on average only 82.4% of male salaries).
But super is probably more important for women than it is for men, since women live longer, and are increasing less likely to be married or otherwise part of a family economic unit in the future.
The 2001 study, ‘Women and Superannuation in the 21st Century: Poverty or Plenty?‘ by the National Centre for Social and Economic Modelling at the University of Canberra, has found that unless there is complete equality in the labour force roles women’s super will remain lower than men’s due to lower female earnings and different workforce participation.
The study found that in 1993 women’s average accumulated super was only $9,647, less than half of the average accumulated super of men. By 2030 the average woman’s super nest egg will increase nine-fold to $89,591 in 1999 dollars, but it will still only be 70% of men’s.
The study found that 10% of women aged 55 to 64 will have accumulated less than $27,300 in super by the time they contemplate retirement (which, at the time, was likely to occur in 2010). This is p 14 Beginner’s Guide to Superannuation obviously far too little. But it is still a vast improvement over the 2000 picture, when the bottom 10% of women considering retirement had super nest eggs of less than $3,850.
More recently, the Australian Industry Super Group report that women typically have 47% less in super than men do at retirement, and that almost 30% of women over the age of 65 live below the poverty line. These findings mean that the majority of women are vulnerable to living below the comfortable or ‘plenty’ level in retirement. While most women will have some super due to the introduction of the Superannuation Guarantee Contribution in 1992, the amounts are not likely to take the average women from ‘near poverty’ to ‘plenty’. Most people feel 60% of pre-retirement income is required to live comfortably in retirement, and the projected amounts, combined with a full or partial age pension, will still not achieve this level.
The problem is particularly pronounced for women in the 40 plus group. Most have little or no super and the high costs of raising families in the next ten years or so means for most the situation will not change before age 50. At age 50 most women have less than ten years of equivalent full time work ahead of them. By then it’s usually too late to make too large a dint in the problem.
The federal government has tried to balance the gender super bias with special rules for spouse contributions, contribution transfers and co-contributions.
It is critical that younger women do not repeat the mistakes of their predecessors, by not compensating for their systemic disadvantage with additional super contributions in their younger years. Women’s contributions should start as soon as possible and should be as much as possible. The earlier the snowball starts, the greater it becomes. Women should not assume they will share someone else’s super in retirement: it may work out that way, but it may not. Under-superannuated older women will be over represented in the ranks of the poor in twenty years’ time, as they are now