Unequal opportunity

Two decades on from the introduction of compulsory superannuation many women are still retiring with negligible balances - enough to last a year or two if they live modestly. They're caught in the double bind of having fewer years than men to save for retirement, while facing the prospect of their money having to last longer - as they themselves do.

According to the Commonwealth Bank's most recent Viewpoint "economic vitality" report, women tend to have just 20 peak earning years in which to save for their retirement, compared with 40 years for men. That's compounded by the fact that they earn 25 per cent less than men, the report says.

The result is that women accumulate only two-thirds of the super that men do - about $35,000 less on average, it says.

Other data suggests an even bigger gap. Australian Bureau of Statistics figures show women accumulating about half the average man's retirement nest egg.

New research by the Australian Institute of Superannuation Trustees (AIST) also points to a frugal retirement for women. The study, including a survey of 800 female retirees aged between 50 and 80, found that - despite the policy aim of super being to reduce reliance on the age pension - three out of four women still require some government support in retirement.

A third of the women surveyed hadn't received super at all. Of those who did qualify for super guarantee (SG) payments during their working lives, half had retired with a balance of less than $31,000.

That wouldn't be enough for a single person to live "comfortably" in retirement for a year, according to the Association of Superannuation Funds of Australia retirement standard, let alone generate the $39,393 needed annually over 20-plus years of retirement. That would require about $500,000 in capital.

The chief executive of AIST, Fiona Reynolds, says it comes down to simple maths: "Women are out of the workforce at exactly the wrong time, for too many years," she says.

"They're missing out on contributions and compounding interest and it absolutely kills their super."

The AIST study found four out of five of women took a career break, lasting an average of 12 years, leaving them with a total of 22 working years.

Their average retirement age was 56 - several years earlier than the official pension age for many of them. Two out of five said they had retired earlier than expected, citing ill health, carer responsibilities or the loss of a job and the inability to find another one.

"There are all these things that come out of the blue," Reynolds says, foiling the best-laid plans.

The outcome was that, of the women in the survey who had super, only 6 per cent said their money lasted more than 10 years 43 per cent said it lasted less than one year.

A psychotherapist who specialises in financial affairs, Bernie Bolger, says women often don't realise the vulnerable position they're putting themselves in when they take a career break to have children without working out how to maintain their financial independence.

It's not that women shouldn't have children, or shouldn't stay at home, she says, but that they should be having a conversation with their partner - earlier rather than later - about how they'll maintain their own financial footing.

"If you leave the workforce at 35 for 10 years and you're a professional woman earning $120,000, you're actually giving up about $1 million in super - that's $10,000 a year in super, compounded over 30 years, earning just 7 per cent," Bolger says.

"That's not even taking into account the income you lose when you leave the workforce, or any extra contributions you might have been able to pay in."

Her advice is that the household income should be split evenly between the couple, even when the woman isn't working. After all, it's only by her staying at home to look after their children that the man can maintain his career and earning capacity.

The woman should have her own bank account and money should continue to flow into her super fund via spouse contributions directly to her fund, transferring (splitting) some of her spouse's super contributions into her account each year, or by making personal contributions.

"It's half your money," Bolger says. "I know this isn't what fairytales are made of but it's the harsh reality when you're looking at a 45-year-old woman across the room who's looking at living out her retirement on the age pension, having been used to living a very good life, because her marriage has broken up."

Yes, the law provides for super to be split upon divorce but the common practice is that the woman gets the house, because she has the children, and the man gets the super, Bolger says.

Two-thirds of First State Super's 560,000 members are women, including many teachers and nurses from the public service, and it recently launched a website dedicated to women and super (www.womenandsuper.com.au). The website is available to non-members as well. "We want women to take some action, no matter how small," says the chief executive of First State, Michael Dwyer.

That might mean making extra contributions at a relatively young age to offset the gap that might come later, he says.

"We realise there are priorities in life in relation to mortgages and raising a family but you can do a quick calculation on the website that shows the difference even a small amount can make. If you make higher contributions before and after [a break], you've got some chance of catching up."

The website includes the example of a woman who uses the higher contribution limits to make up for lost time. "Margaret", having taken time out to have a family, returns to work at age 47, with no super.

Three years later, now 50, she has $13,200 in her fund and has reached the age when she can salary sacrifice up to $50,000 annually into super.

She and her husband decide to continue living off his wage, as they have done for years, and divert most of her pre-tax salary of $57,000 a year into super.

The outcome is that at 60, she'll have about $537,000 in super. If she doesn't salary sacrifice and relies solely on the SG contributions paid by employer, she'll end up with less than $80,000.

First State marketing manager Karen Volpato, who oversaw the new website, says it's a common misunderstanding that you have to be working to contribute to super.

The law allows anyone up to age 65 to contribute to super regardless of whether they're working or not.

When First State looked at its database, it found thousands of members who weren't receiving SG contributions but who nevertheless were making personal, after-tax contributions.

"Many of them were at home with children," Volpato says. "They recognise that they need to keep their super going."

ASFA's tips for women to improve their super include consolidating multiple super funds to avoid paying multiple fees, asking your employer to pay the SG even if you don't meet the $450-a-month threshold for contributions to be compulsory, and pushing your employer to allow you to salary sacrifice into super (there's no compulsion for them to help with this).

Also, women should do everything they can to scrape together a $1000 personal contribution so they qualify for the government co-contribution, it says.

Under the co-contribution system, the government matches contributions dollar for dollar up to $1000 if you earn less than $31,920, or by a reducing amount between there and the cutoff point at $61,920.

On the policy front, the AIST says lifting the SG to 12 per cent will help women but it also wants super to be paid during parental leave.

It wants the $450 threshold abolished and the co-contribution extended or enhanced and it has suggested a $2000 "return to work" super bonus for older people who have been out of paid work for a significant time.

Reynolds says the need for women to get their super in order will only increase. "While our survey shows people who are currently retired are doing OK on the age pension, they were brought up in a different time," she says. "They own their own house, they've lived on one income and their expectations are different.

"But we're going into a period when people are going to have lots of debt, possibly won't own their own home, or won't have paid one off. There's just not enough consideration given to how we are going to fund our retirement, because the pension isn't going to do it."

Catching up not that easy

Superannuation wasn't compulsory when Dianne Byers joined the workforce, then she took time off to have three children. So it's only since she started teaching in 2007 having trained as a mature-age entrant that she's qualified for the super guarantee.

As a result, the Narellan Vale Public teacher doesn't have much super and, at 47, knows she has a relatively short time in which to catch up.

Byers isn't topping up the 9 per cent compulsory super that goes into her First State Super account, with the mortgage on her home in south-western Sydney being first to get any extra money. She and her self-employed husband also have an investment property. But she can see how careful her mother, a retired teacher, is with her money as her super balance runs down. "When you see that happening, it makes you wonder," Byers says.

It's easy to avoid thinking about retirement while you're still working, she says. "I know it's something I have to take seriously but I keep putting it off, and then another year's gone."

Byers plans to talk through the options with the family's accountant.

Forced to take early retirement

Paula Johnston worked virtually her whole life taking only a year off to have her two children but ended up retiring much earlier than she'd expected.

Unfortunately, ill health forced her into retirement at age 59.

Johnston, who worked in childcare and children's services, receives an allocated pension from her superannuation and is fortunate to be covered by a defined-benefit scheme, where her pension is paid according to a formula rather than being reliant on investment returns.

She's a big fan of superannuation, saying people should contribute extra if and when they can.

"It's just savings that you can't touch yet," she says.

"What I find interesting about many women is they don't understand super, or don't make it their business to understand super," Johnston adds. "[But] one day you'll regret your 'why worry about it?' status."

A self-confessed "SKI" (spending the kids' inheritance), Paula says her children are far better educated and therefore earning much higher wages than she or her now-retired husband ever did, so she's not worried about leaving anything behind.

Instead, the couple have been travelling, visiting New Zealand and towing a caravan on local trips.

Key points

O The average woman has halfthe working years of a man inwhich to save.

OWomen also tend to earn lessand they generally live longer.

O Four out of five take a career break, for an average of 12 years.

O Many women retire earlier than they expected.