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Closing the superannuation gender gap would raise billions

Australia's gender pay gap has narrowed thanks to employer action, but the WGEA says more can be done.

Australia's gender pay gap has narrowed thanks to employer action, but the WGEA says more can be done. Photo: AAP

Closing the gender gap in superannuation would boost Australian super balances by an aggregate $94 billion.

That would not only improve the financial position of women in retirement, it would provide a significant boost to investment funds available in the financial markets, according to research from Colonial First State and the University of Western Australia.

There are two crucial factors influencing the gender gap in super. The first is the effect of women taking time out of the workforce to raise children.

As The New Daily reported recently, five years out of the workforce raising children means that, all other things being equal, women retire with 20 per cent less in super than men.

The problem is that all other things are not equal. The Colonial report shows that across all age groups the median female super balance is 35 per cent below the same for men. In the later years of work the gap is as high as 47 per cent.

Median super gender gaps by age group.

Median super gender gaps by age group.

If it was just about time out of the workforce, the super gap would be about 20 per cent.

The key to why women’s balances are so much lower than men’s is about wage levels themselves. Women are consistently earning less than men regardless of the age group they are in.

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Women’s earning underperformance.

The situation is the same in many countries. Overall Australian women in full time work on average weekly earnings make on average 17.4 per cent less than their male counterparts, the same result as in the UK. In the US the gap is 18.9 per cent.

When the figures are broken down into age groups, the gender pay gap widens as Australian women get older. It peaks for women in the 45 to 54 year age group at 21 per cent.

From then it falls slightly in the 55 to 64 per cent cohort then begins to rise again.

Industry Super Australia CEO, David Whiteley, said the gap between men and women in super has an extra worrying dimension.

Longevity is often ignored

“Women will on average live longer and actually need more savings to see them through their retirement.”

Longevity and lower balances is a recipe for poverty. Photo: Getty

Longevity and lower balances are a recipe for poverty. Photo: Getty

“The gap starts to accelerate from the late 20s through to late 40s – the period when many women work part time to care for children,” he said.

“Our research suggests increasing the super guarantee to 12 percent as soon as possible will have a significant impact along with improving the fairness of super tax breaks.”

The super guarantee paid by employers into workers’ super accounts was due to grow from the current 9.5 per cent to 12 per cent by 2019. However the Abbott government put this date back to July 2025.

The investment effect

If the gender gap in super balances were to be equalised, it would have a big effect on the amount of super monies available for investment in the economy.

Using the median figure, the halfway point between the highest and lowest balances, an extra $94.2 billion would be available for investment by super funds if the gender gap was closed. If the participation gap caused by women’s time out of the workforce for child rearing and other social factors were closed, the total extra amount available for investment would be $145.8 billion.

There's big bucks in equality.

There’s big bucks in equality.

 

Women can act

“Perhaps the most worthwhile thing many women can do is ensure they are in a high performing fund with low fees and to consolidate accounts,” said ISA’s David Whiteley.

 “Extra voluntary contributions made into a high fee low performing fund will be improving someone else’s retirement – not yours,” he said.

 “If you can afford extra voluntary contributions the superannuation co-contribution scheme can help. The best place for advice is your super fund – typically it is free,” he said.

 

 

 

 

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