For many women, increasing savings into super is only practical when they’ve returned to work full-time, have repaid the mortgage or when family expenses have eased. The government has previously recognised this by allowing higher contribution limits in the years closer to retirement. However, the government recently legislated that regardless of age, from 1 July 2017 the annual concessional salary sacrifice limit will reduce to $25,000.
Australian women earn around 83.8 cents for every $1 that men earn
The national gender pay gap was 16.2 per cent1 as at May 2016, and has been reasonably stagnant for the past two decades. The Workplace Gender Equality Agency (WGEA) monitor pay information and over the last 12 months found that on average women working full-time earned $1,352.40 per week compared to $1613.60 per week for men in equal roles2.
WGEA’s ‘Equal Pay Day’ marks the additional time from the end of the financial year that women must work to earn the same as men – for the 2016 financial year it was 8 September3. That means women are required to extend their working year by 70 days in order to achieve salary parity with males, and this inequality also applies to super balances – in fact, from as young as 20 women will likely have a lower median super balance than their male counterparts4.
And when it comes to making personal super contributions in order to bridge the gap, women are often further disadvantaged because they undertake the bulk of unpaid caring roles for their children, parents and often their partner’s parents. In addition, greater numbers of women work part-time or in employment positions that pay below average weekly earnings.
We are living longer and the face of Australia is changing
One of the biggest challenges of our ageing population and increasing life expectancies is how Australians will support themselves in retirement. The age pension, compulsory super and voluntary savings are the three most common contributors to retirement income, yet total wealth for the majority of Australians remains well short of levels required to fund retirement through to life expectancy without significant support from the age pension.
An increasing proportion of retirees are also now living to 90 – an expected 40 per cent of females and 26 per cent of males5. And there is uncertainty around employment through to age 65, with almost half of men and just over a third of women who retire between the ages of 60-64 doing so involuntarily6 due to health, caring responsibilities or for job-related issues such as lack of available work.
Experts predict significant changes to our workforce over the next decade
Trends such as the rise in self-employed workers, the shared economy and flexible employment contracts could mean the salary and super gaps facing women grow exponentially if action is not taken now.
Adding to the complexity is the fact that financial wellbeing must be balanced over an individual’s entire life. And while the 2016 budget included a ‘catch-up’ contribution provision which would allow women to carry forward their unused concessional contribution cap in order to make up for lost super years, without addressing the gender pay gap it may be difficult for women to take advantage of this well-meaning opportunity. Boosting super contributions at the cost of day-to-day essentials or home ownership is simply not practical for most women.
So is the future looking super for women?
With lower incomes, broken work patterns and a higher propensity of returning to part-time work, there is no denying that women are up against it. Even a two-year break in paid employment from age 32 onwards could result in a super balance $35,000 less than someone on exactly the same income but in continuous paid employment7. By addressing the gender pay gap today, women will be in a better position to build their own wealth for retirement and have an equal footing in home ownership. However, if we fail to address it, women will continue to face poorer outcomes in retirement for at least another 30-40 years.
This insight contains general financial advice and was prepared without taking into account your objectives, financial situation or needs. Any forward-looking statements in this insight are based on current expectations at the time of writing. No assurance can be given that such expectations will prove to be correct. As always, your personal circumstances are critical when considering any financial strategy and seeking professional personal advice is highly recommended.
- Nerida Cole, Managing Director, Head of Advice, Dixon Advisory
Footnotes:
2. Australian Government, The Australian Bureau of Statistics, ibid
3. Australian Government, Workplace Gender Equality Agency, ‘Marking Equal Pay Day 2016’, viewed 6 September 2016