Originally written by Nicki Bourlioufas for Morningstar
Australia's female labour force participation rate reached an historic high of 60.5 per cent in January 2018 and continued growth could help to grow women's superannuation balances, which still significantly lag those of men.
Average superannuation balances in 2015-16 for people aged 15 and over were $111,853 for men and $68,499 for women, according to data from the Australian Bureau of Statistics.
Moreover, women are still retiring with substantially lower savings. Average superannuation balances at the time of retirement (at ages 60 to 64) in 2015-16 were $270,710 for men and $157,050 for women. This falls well short of the $545,000 needed for a comfortable retirement, according to the ASFA Retirement Standard for a single person.
Even more worrying is that one in three women reported retiring with no superannuation savings in 2015-16. That compares to 27 per cent of males who reported nil superannuation.
According to the Association of Superannuation Funds of Australia (ASFA), there are several reasons women have less superannuation. Women spend more time out of the paid labour force for family reasons, including caring for children as well as parents. Women are also more likely to be employed in part-time and lower-paid jobs.
ASFA CEO Dr Martin Fahy says lifting the Superannuation Guarantee (SG) to 12 per cent needed to happen sooner rather than later to adequately address the lack of sufficient superannuation held by women.
"Security for women in retirement is an important issue. Despite increasing workforce participation by women, there still remains a significant disparity between the retirement incomes of men and women. There are a number of factors that contribute to this, including broken working patterns," Fahy says.
"While this is not confined to women, given that caring for children, parents, and other family members is more often than not performed by women, this results in both breaks in employment, and frequently, significant periods of part-time employment.
"The gender pay gap and the increasing casualisation of the workforce also contribute to the gap. While this is not unique to women, this does have a tendency to affect roles which predominantly employ women, such as the caring professions, hospitality, and retail."
Dr Fahy recommends women make the best use of the federal government's tax concessions for superannuation contributions.
"There is a $25,000 annual concessional contribution cap and the ability to make catch-up contributions from 1 July 2018, using previously unused cap amounts on a rolling five-year basis for anyone with less than $500,000 in super," he says.
"You may also be eligible for a super co-contribution from the government of up to $500 if you make personal super contributions and earn less than $51,813. The Low Income Super Tax Offset (LISTO) provides a refund of contributions tax for anyone earning up to $37,000, up to a maximum of $500.
"If you have received a large windfall (such as from an inheritance) or sold an investment property, think about putting the proceeds into super. You can make a $100,000 after-tax annual contribution if your super balance is less than $1.6 million as at 30 June of the previous financial year."
Financial adviser Jay Adamson with countplus one says women need to take a greater interest in their superannuation.
"It is 9.5 per cent of your salary and it is important. Make sure you are invested in the right asset allocation to achieve your objectives. Check on fees and charges and find a fund that meets your current needs (and this may change over time)," she says.
Salary sacrificing is also important. "Ask your employer to contribute part of your pre-tax salary directly to your superannuation fund. For example, if your taxable income is $80,000 a year, a superannuation contribution of $100/week will reduce your net take home pay by only $59/week," she says.
"If you are self-employed, don't neglect to make superannuation contributions--they are a tax deduction for your business."
She also recommends working with your spouse. "If you earn less than $40,000, then your partner can get a tax offset of up to $540 on contributions made to your complying superannuation fund. There may also be advantages for you in 'superannuation splitting' where part of your spouses' superannuation can be transferred to top up your own superannuation account," says Adamson.
ASFA recommends other policy changes that would further improve superannuation outcomes. These include payment of superannuation contributions linked to paid parental leave.
In addition, removal of the $450 a month threshold for payment of Superannuation Guarantee contributions would also benefit women, say Ross Clare, director of research, ASFA, in a recent research paper.
This information is of a general nature only and has been provided without considering your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate considering your objectives, financial situation and needs.
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