International Women’s Day provided an opportunity to bring into focus the growing gender gap in relation to superannuation balances and the wealth of Australian women heading towards retirement.
The gulf in retirement wealth between men and women can no longer be ignored. A recent study, by Australian Super found the average woman will retire with 42 per cent less in super than men. Some of the changes to superannuation over the past few years, including the upcoming changes which will take effect in July 2022, will start to address this. However, it is important to not only look at retirement income but also at what can be done to level the playing field for women, starting with their overall income and their ability to earn more all the way through their working career.
There are several factors that impact a woman’s ability to effectively save for retirement. Superannuation contributions take a hit when a woman is out of the workforce for extended and/or multiple periods of parental leave, and together with the ongoing responsibility of childcare and working part time in lower paid roles, leads to lower superannuation balances and overall wealth levels for Australian women The rise in divorce rates is also leaving women vulnerable when they retire if they have not been working and growing their superannuation balances.
There is no quick fix to these issues, but some of the recent changes to superannuation have started to address this gap.
These changes include:
· Increasing the superannuation guarantee from 10% to 12% by 2025.
· Removing the $450 per month threshold for superannuation guarantee contributions.
· Retention and development of the superannuation co-contribution scheme.
· The reporting of poor performing super funds, hence increasing the ability to find a better super fund that will yield the right returns.
· Maximising voluntary contributions and co-contribution opportunities including spouse super contributions.
There is a lot more to be done and a lot more that the government can do to close this gap.
Australia introduced paid parental leave in Australia in 2011 and the federal government’s Paid Parental Leave Scheme ensures that eligible working parents (usually women) receive up to eighteen weeks of pay at the rate of the national minimum wage. Unfortunately, this scheme does not attract the compulsory superannuation guarantee from the government or from your employer.
The ACTU and women’s advocacy groups has been rallying the Federal Government to introduce superannuation guarantee contribution for all paid parental leave payments, but unfortunately the government has not taken up this recommendation at this stage. With a
federal election approaching, there is pressure from many groups rallying for this change to be introduced.
While we wait to see what governments will do to further address this super gap, it is important for women to take charge of their own finances and ensure they prepare for the unexpected. Aside from superannuation, we recommend the following;
· Save for a rainy day – A rainy day savings account or emergency fund can help keep you afloat if something unexpected occurs.
· Start investing early – Thinking about your financial wellness is a bit like your health. Just like you would take out a gym membership to keep you fit and healthy, we recommend getting advice and planning your investments as soon as you begin to earn an income. Starting early allows more time for assets to grow, whether it be property, shares, managed funds or even term deposits.
· Get tax advice – There are tax strategies that can help lower your tax bill, offset your taxable income and add to your superannuation.
· Protect yourself – Review your current insurance cover, the right personal protection insurance cover will help protect you, your income, and your assets.
· Protect your family – Life insurance and total permanent disability (TDP) cover can make all the difference for them if some should happen to you, and vice-versa for your partner.
· Diversify – Don’t put all your eggs into one basket, a diversified portfolio is a less risky option.
· Seek financial advice regularly – just like a personal trainer can help with your physical wellness, a financial advisor is well equipped with the knowledge to help you with your financial wellness. At Tribel, we recommend getting a financial health check as you move through each stage of your life.
As we recognise International Women’s Day, we hope that some of the changes will start to make a difference, especially with superannuation. It is important for women to take control of their financial independence. Contact your Tribel Advisor if you would like a health check and some advice on how best to prepare for the future.