The gender pay gap in Australia is currently hovering around 19 per cent and the effect of women earning so much less than men has an impact that reaches way beyond their working lives.
The gender pay gap begets a superannuation gap, with women retiring with an average of 47 per cent less than men, or $105,000 versus $197,000. Cast forward to 2030 and things aren’t forecast to improve by much. The gap then is projected to be 39 per cent.
There’s a few obvious reasons.
Women are over-represented in industries which traditionally pay less, such as administration and community service for example.
Taking a career break to have children also has a big impact on superannuation earnings. A woman who takes five years off work between 29 and 34 to have children can expect it to affect her superannuation balance to the tune of $100,000 at retirement.
It’s also the case that women tend to take less of an interest in superannuation when their earning capacity is highest – ages 30 to 45 – according to a survey by online super advice company Decimal.
This superannuation gap is one reason Industry Super Australia is keen to see that the Low Income Super Tax Offset will be introduced in 2017.
The offset will see up to $500 per year refunded into the superannuation accounts of people earning less than $37,000 per year, representing the tax paid on their concessional superannuation contributions.
It’s expected of the 3.1 million workers to benefit from the offset, 1.9 million will be women.
According to the Australian Institute of Superannuation Trustees, without the offset, those 3.1 million workers would be paying more tax on their super than their take home pay.
But while government has a big role to play in redressing the balance, individuals can also take steps to improve their situation.
If you’re a woman, or anyone for that matter, staring down the barrel of a retirement balance that seems unlikely to support your lifestyle, your first step should be to work out if you can afford to make an after-tax contribution to your super.
If you earn $31,920 or less, the government will match every extra dollar you contribute, up to $1000.
And you don’t have to add much to your super to make a big difference. Salary sacrificing might sound like a move a high roller might make, but it can be just as effective for those on lower incomes.
For example, if you earn $50,000 per year and have $40,000 in super, and could get by on just $13.10 per week less, ask your employer to add that to your superannuation and you’ll pay just 15 per cent tax on that amount, meaning your super coffers will increase by $20 per week. If you’re 35 when you make this decision, that will amount to an extra $43,948 when you retire.
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