The massive financial shakeout caused by COVID-19 has hit women harder than men and widened the superannuation gender gap, according to new research from Commonwealth Bank’s Colonial First State.

Surveys of the group’s 750,000 superannuation clients demonstrate this, with men’s average balances of $88,934 in December 2020 being 18 per cent higher than the women’s average of $73,139.

Back in 2016 the difference was just 16 per cent, CFS said.

Although more men accessed their super early during the pandemic, women’s super balances were harder hit as they were smaller to begin with.

The average super balances of women who made early withdrawals was down 21 per cent compared to 18 per cent for men, CFS found.

The data also showed that men were approximately 20 percentage points more likely than women to sacrifice their salary into super (61 per cent compared to 39 per cent).

Research group Finder also looked at voluntary contributions to super and found that, overall, 34 per cent of its small survey group (1015) had made them.

Like CFS, Finder found that women were far less likely (25 per cent) to make voluntary contributions than men (43 per cent).

Of voluntary contributors, 20 per cent paid in regularly every month, while 14 per cent did so on occasion.

Importance of voluntary payments

Antoinette Mullins, principal with Beyond Today Financial Planning, said the figures highlighted a need for everyone to make personal contributions to super, particularly women.

“When people first come to see me they have usually made no voluntary contributions,” Ms Mullins said.

“But increasingly they are aware that they should be because of barbecue talk and the like. They are hearing their friends say things like, ‘my ageing parents can’t live on the pension alone’.”

“I suggest to clients that they start to make even small voluntary payments, like $50 a month, which will add up into a significant amount over time.”

One useful strategy is to devote some, or all, of a pay rise to voluntary contributions, which means that you are giving up a small amount of money that you were used to doing without anyway, Ms Mullins suggested.

“If you are young, relatively low extra contributions will lead to a higher balance than even if you start to pay in $1000 extra in the run up to retirement,” Ms Mullins said.

Research from Industry Super Australia also highlights the gender gap in super, which reaches a peak for women in their 40’s and 50’s, when time out of the workforce during motherhood has had the most impact.

ISA advocacy director Georgia Brumby said, “It’s not right that women retire with balances persistently lower than what they need for an adequate retirement. Government MPs have a choice: they can fight for a super increase and to get super paid on every dollar earned, or turn their back as more women risk retiring into poverty.”

“There is little more important to a women’s economic security than super,” Ms Brumby added.

Alison Banney, superannuation specialist with Finder, highlighted the need for extra super savings by pointing out that neither men nor women are ending work with balances anywhere near enough to fund a prosperous retirement.

Finder’s analysis of ASFA data showed that, “on average, men can only live off their super for 3.5 years, while women’s funds would only last 2.8 years,” Ms Banney said.

“The likely scenario for many is that their super fund might be enough to scrape by, but it won’t allow them to enjoy the golden years in the way they had planned,” Ms Banney said.

The problem of inadequate retirement savings is being compounded because people are living longer, on average, than they used to.

Longer life, less money

World Bank data shows Australian life expectancy stood at an average of 82.75 years in 2018 compared to 77 back in 1990, so saving what might have been a reasonable retirement two decades ago won’t be enough now.

“You could be retired for an extra decade than your parents – so you really need to take this into account much earlier in your life,” Ms Banney said.

Starting early on voluntary contributions can have a remarkable effect on saving outcomes too.

“A woman came to me recently whose father had sat her down at 19 and said adding extra to super was the most important thing she could do,” Ms Mullins said.

“Now she’s 43 and yes, she earns well, but she’s got over $500,000 in super.”

The New Daily is owned by Industry Super Holdings.