The superannuation gender gap

As the debate over the adequacy of superannuation rages, the issues specific to women and superannuation are growing in prominence. And rightly so.

A paper delivered by the Association of Superannuation Funds of Australia (ASFA) principal researcher, Ross Clare, in July 2001, highlighted a number of restrictions women continue to face with regards to saving for adequate superannuation.

Research by ASFA found that as at the year 2000, men spend an average of 38 years in paid work while women spend the equivalent of 20 years in full-time work.

Time spent out of the workforce to raise a family is one of the biggest contributors affecting superannuation levels for women, and is compounded by the popularity of part-time work once women return to paid employment. Australian Bureau of Statistics (ABS) figures show 25 per cent of women compared with 13 per cent of men are in casual employment.

Rates of pay for women also continue to be an area of differentiation, with nearly 50 per cent of working women in the relatively lower paid occupations of clerks, sales assistants, cleaners and tellers, according to ASFA research, and thus a lower average of total remuneration for women.

“Differences between men and women in the average hours of involvement in paid employment are compounded by differences in average hourly earnings,” Clare’s report says.

And as the life expectancy of women exceeds that of men, the number of divorced or widowed women entering retirement is also predicted to rise. According to ASFA research, in 1999, there were less than 10,000 divorced women aged 59, with the figure likely to increase by 50 per cent by 2004 and by 100 per cent by 2009. ABS statistics show a woman’s life expectancy at birth in 1999 was 81.8 years and 76.2 for men. And at age 65 life expectancy was 20.2 years for women and 16.6 years for men.

The figures paint a less than bright picture of the future superannuation holdings for women. Findings from a Commonwealth Bank national survey last month showed 36 per cent of women believed they would not have enough money to live on when they retired, unless they were given financial assistance.

A further 18 per cent revealed they would need to significantly scale back their lifestyle to survive financially. In comparison, the study found 43 per cent of men would either require help or have to cut back their lifestyle to survive.

BT Funds Management executive vice-president and head of BT Private Investments Division, and author ofThe Woman’s Money Book, Vivienne James, says education is the first step in dealing with the issues women face in superannuation.

“Education is the most significant reason as to why women are not confident about superannuation. Women should know and understand their money situation and needs for retirement, and the strategies they need to get there,” James says.

First published in 1996,The Woman’s Money Booktakes a practical look at the issues women face, such as family and children, and the decisions they have to make.

“There was a gap in the market for more comprehensive information. From the woman’s perspective it looks at the nuances within superannuation they have to identify,” James says.

She says a greater focus on providing the tools to allow women to become educated in superannuation issues is important, such as seminars and presentations, before tackling the solution strategies.

James also believes there is a hole in the financial advice market for women, as those on low incomes face difficulties with meeting the costs involved to obtain advice. More affordable financial planning and advice services, involving a scaled version of a simplified plan, would address this problem, she says.

“It’s hard for women because financial planners are professionals and there is a fee charged. But there is a big market for the people who need advice but are dissuaded by the prospective fee,” she says.

For those receiving financial advice, spouse contributions and spouse contributions tax rebates, introduced in 1987/88, continue to be the main strategies of balancing superannuation levels between a wife and husband.

“The spouse contribution was a step forward, and the spouse rebate was also good to see, but there is definitely much more to be done,” James says.

AM Corporation technical services manager Kim Guest says where a woman’s superannuation is significantly less than her partner’s — a common circumstance for the majority of couples — strategies such as voluntary spouse contributions can boost the wife’s super with the maximum amount, while still taking advantage of tax breaks.

Clare says while more women than men are likely to benefit from spouse contributions, the amount of such contributions is relatively minor compared to aggregate employer and member contributions.

ABS projections show 21 per cent of people aged 65 years and over in 2021 will be women living alone, compared with eight per cent of men.

For the substantial percentage of women who face retirement without a partner, Guest says social security is the main point of strategy development, while for recently widowed women, death benefits within superannuation are the biggest area of focus.

While the pre-retiree market remains a focus given the numbers entering this stage of life, Guest agrees education is the key and says there is a gap in addressing superannuation issues for the accumulator range, women in the 25 to 40 age group.

“The pre-retirees are looked after quite well at the moment, but there needs to be a greater focus on the education of the accumulator group,” she says.