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New research suggests that Australia’s super system inherently disadvantages women and that when women do retire, they do so with less than half the super savings of their male counterparts. Given that women typically live longer than men, this means they have to survive longer on less. But is it just our super system at fault or do our laws and our attitudes towards women and their role in society also contribute to the inequity?

Research from the Queensland University of Technology (QUT) argues that there are two main reasons our super system disadvantages women – women take time out from the workforce and they often earn less than men in a wide range of careers.

The Australian super system is designed to reward long and continuous periods of employment. Unlike the majority of men, women tend to have broken employment patterns often moving in and out of the workforce as they have children, raise families or take on other family responsibilities.

Added to this is despite the fact that we live in an age of so called equal pay, women still get paid less than men (according to the Australian Bureau of Statistics, the gender pay gap has widened to 17.53%). This directly affects the amount put aside for retirement. Women also tend to be over-represented amongst low-paid and casual workers. These workers often don’t meet the earnings threshold that applies to super and sometimes have no super at all.
 
In the farming sector, many women are self-employed. The Association of Superannuation Funds of Australia (ASFA) estimates that nearly one third of self-employed business owners have no super and of those that do, 53% have a balance of less than $53,000.

With all of these factors stacked up against them, it’s not hard to see why some women might see our super system as anything but super.

Bridging the gap
According to the ASFA, the average retirement payout for women is only $73,000 compared to $155,000 for men.

The picture is even worse for divorced women who have to rely on their own resources in retirement. ASFA estimates that recently divorced women currently have around $40,000 in super compared to around $145,000 for men.

If we are to address this problem, argues Dr Anup Basu, author of the research QUT’s School of Economic, we should aim to make our super system more gender sensitive.

He calls for a two pronged approach – firstly to increase the mandatory contribution rate for women to at least 12% (15-16% would be ideal) and secondly to encourage women, who are traditionally less risk averse than men, to invest in high growth strategies, particularly if they have many years before they retire. This approach is likely to cause much discussion as government, employers, super funds and the community debate whether the approach is practical, fair and more importantly, who pays for any increase in mandatory contributions.

ASFA and the Australian Institute of Superannuation Trustees (AIST) both agree that reforms are needed. Both are seeking to lower or remove the monthly income threshold that disadvantages many part-time and casual workers, while AIST is calling for a ‘Super Baby Bonus’ for women who leave the workforce to have a baby.

ASFA has also proposed a number of reforms to help restore some gender balance to our super system. These include:

• Raising the income threshold for the government co-contribution so that more individuals in the lower/middle income groups can qualify for the full amount.
• Introducing ‘soft compulsion’ on employee contributions.
• Encouraging or requiring employers to help employees contribute an additional one per cent of salary or wages into super each time they receive a wage increase or start a new job, up to a maximum of 3%.

It’s not just the super system
If we are serious about addressing the issue of inequitable retirement savings, it’s not just the super system that needs to change. We need to place greater value on the work – both paid and unpaid - that women undertake. We also need to review our workplace and maternity laws to ensure that women are not disadvantaged if they take time off work to have a family.

Maybe as a society we need to insist that the government’s 18 week funded maternity leave scheme is subject to compulsory super contributions. Maybe we need to have part of the baby bonus paid directly into women’s super accounts. And maybe we need to ensure that equal pay actually means equal pay, especially for comparative work.

How to boost your super savings
While we wait with bated breath to see whether these suggested reforms gather momentum, here are some ways that individuals – male or female - can boost their super balance now.

Get your spouse to top up your super
If your partner earns more than you do, they can help boost your account balance by splitting certain super contributions with you. Contact your super fund to see if they can facilitate contribution splitting. The ATO limits how much you can split with your spouse so check their website for the current thresholds. 

Salary sacrifice into your super
When you salary sacrifice, you reduce your pre-tax salary and pay that amount as extra super contributions. Salary sacrificing is a popular way to boost super savings because, as well as increasing your savings, you also reduce your taxable income which means you may save on income tax. 

Take advantage of government co-contributions…
As an incentive to get people thinking about their super, the government will dollar match all post-tax contributions you make to your super fund up to a maximum of $1,000. So if you earn less than $60,342 a year you could be eligible to receive up to $1,000 in super contributions from the Government. The amount of the co-contribution you receive will depend on your income and the amount you have paid as a personal contribution to your super fund. 

… and the spouse tax offset
If you earn less than $13,800 a year, your spouse may be able to claim an 18% tax offset on super contributions of up to $3,000 they make to your super fund on your behalf.

Review your investment strategy
If you want to increase your super savings it could be worth reviewing where your money is invested. If you can stomach the risk, it might be beneficial moving to a high growth strategy, especially if you’ve got a number of years to go before you retire.

Get financial advice
It’s always a good idea to speak to an independent financial advisor before making any major financial decisions. An advisor will be able to help you assess your tolerance to risk and prepare a financial strategy that is suitable for you and your long-term goals.

 
Prime Super is a not for profit industry superannuation fund. This article contains general information only and does not take account of your personal circumstances. You should obtain personal advice where appropriate. Prime Super is issued by Farm Plan Pty Limited (ABN 81 067 241 016, AFSL 219723). A Product Disclosure Statement is available from the issuer by phoning 1800 675 839.