From the moment women enter the workforce, they are disadvantaged. Despite perceptions that the gender pay gap is closing, the reality is far more grim: The gap is now larger than it was 20 years ago, and is steadily increasing. This, combined with other factors such as childcare and unpaid work, disadvantages women throughout their lifetime and often leaves them in poverty during their retirement years.
A new report about women’s economic security in retirement, released exclusively to The New Daily, reveals Australian women experience much greater poverty than men during their retirement years. The Workplace Gender Equality Agency (WGEA) found factors such as marrying someone older, earning less money than men, taking primary responsibility for unpaid care-giving and household chores heavily disadvantaged women’s retirement prospects.
Director of the Workplace Gender Equality Agency, Helen Conway, said women were “2.5 times more likely to live in poverty than men”.
“This is why it’s so important for women to engage with superannuation as early as possible,” she said. “Because of the disadvantages women suffer, they need to develop their financial literacy around superannuation earlier. They actually don’t understand how it works until it’s too late, and their balances are too low. The earlier you contribute, the better”.
OECD figures showed that in 2009-10, 60 per cent of Australian women aged 65 to 69 had no superannuation funds saved. Worryingly, in that same year, nearly 40 per cent of all women had no super.
Because women are generally the primary carers of children, and often involved in other unpaid labour such as caring for family members or friends, their participation in paid employment throughout their working lives tends to be more sporadic than that of men. Women are also more likely to be employed casually or part-time because of these family responsibilities: according to the Australian Bureau of Statistics, close to 75 per cent of all part-time workers in 2011 were women.
The gender wage gap is another contributing factor. The WGEA found that for every dollar earned by a man, a woman will only be paid 82 cents, with the difference working out to be as much as $1.2 million over a working career.
According to recent statistics released by the Australian Institute of Superannuation Trustees, the average superannuation payout at retirement in 2013 for women was $112,600, compared with $198,000 for men.
Female graduates also suffer: research conducted in 2012 found that women today earned $5,000 less than their male counterparts in their first year out of university. Add to that women’s longer life expectancy, and a huge problem emerges.
What steps can women take to prepare for a comfortable retirement, despite these inherent disadvantages?
Consolidate your super
Women often have multiple funds, as they are more likely to work part-time or casually and therefore tend to change employers with greater frequency than men. As each account is charged its own set of fees, it is beneficial to consolidate all your accounts into a single fund. Websites such as http://www.findmysuper.com.au can help keep track of missing super funds and accounts.
Although our employer is legally obliged to contribute 9.25 per cent, it never hurts to put in additional payments.
Sarah Cummings, wealth product manager at ClearView, said even putting in $20 a week can make a large difference.
“Giving up buying that one coffee a day can contribute a huge balance to your super. The earlier you start, the longer the money is in your super account, and the more income it can earn in a tax effective way,” she said.
Keep superannuation front of mind
If you own a business, make sure to pay yourself superannuation. As setting up a business is an expensive venture, women often forget to pay themselves superannuation and even a salary when they first begin, which can severely impact their final retirement balance.
Working for multiple employers on a part-time or casual basis is also disadvantageous. The government’s 9.25 per cent superannuation guarantee coverage is only paid to people who earn at least $450 a month with a single employer. So, if you only work two shifts a month for one employer and earn less than $450, you are not entitled to have superannuation payments.
If you have a partner, this is a very effective way of ensuring continuous or additional superannuation contributions. If you earn $13,500 or less a year, and your partner contributes money towards your superannuation fund, he can receive an 18 per cent tax offset.
“For example, say the women is earning $10,000 per year. Her partner puts $3,000 into her superannuation account, and when he lodges his tax return, he can claim the tax offset of $540, which is 18 per cent of his contribution,” Ms Cummings said.
Have life insurance
Managing director of ClearView, Simon Swanson, said life insurance is an essential component of retirement. “When something goes wrong from a health perspective, it’s a great fall back and will ensure you have a means to pay for your health during the retirement years,” he advised.