Women's rights run out at retirement

The Treasurer has made encouraging noises about doing something to fix the retirement savings gap between men and women, but it's a really tough nut to crack.

Key points

  • Men reach retirement with much higher super balances than women
  • The government has said it needs to face up to the problem
  • Will the super rules be changed again?

Is there any hope the retirement savings gap between men and women can ever be joined? It seems like a dream too far, considering society and biology place such a burden on women when it comes to keeping the human race going.

But the government may be looking for a fix to the problem, depending on how recent comments by Treasurer Scott Morrison are interpreted.

“There has to be some flexibility in the system for people who may incur disruptions on their working life,” Morrison told the press in late October.

Might he be referring to women? If he is, then the numbers back him up. The latest national statistics show the median retirement balance for Australian women is 47% lower than for men, an increase (or decrease, really) from 39% only two years previously.

But what are the options available to women who feel compelled to top up their balances? Let’s have a look.

  • They can earn more money, so that guaranteed employer contributions simply increase in a similar ratio. But in this economy it’s very hopeful to hold out for big pay rises. If earning more money means working longer hours, then overtime won’t be answer because super isn’t paid on overtime. How about working another job? That would work, but dependents would suffer. And when the dependents are little people who need to be read to and tucked into bed, the long term cost could outweigh the benefit. The most obvious solution doesn’t sound like a very fair one.
     
  • They can hope the government might propose a higher guaranteed employer contribution rate for women than for men, which if it didn’t start some sort of gender war would only guarantee that wages growth for women flat-lined or went negative. (The Greens tried to change the sex discrimination act for this purpose late last year but failed.)
     
  • The government could consider larger increases to the super guarantee rate, which would as surely increase women’s retirement balances as it would men’s. The savings gap would still be there, but at least the balances would be higher. If increasing balances is the goal, this would work.
     
  • Superannuation could be paid on maternity leave, which seems like a solution that would go to the heart of the problem. Yes, it could be paid on paternity leave too. But the benefit would surely boost women’s balances more than men’s. It’s hard to see political resistance to this suggestion. Super is already paid on sick leave and annual leave, so why not maternity leave?
     
  • The low income super contribution, a government co-contribution of up to $500 for workers earning less than $37,000 a year, may get the chop from 2016-17. Sure, keeping the co-contribution as it is won’t narrow the outcome for men and women, but if it is taken away the retirement savings gap between the sexes will only widen. Without the benefit, not-for-profit industry group Women in Super says about 80% of the female part-time workforce will receive a tax penalty for saving for their retirement.
     

The great unknown here is the extent to which men and women share their wealth in retirement. If most couples manage to make it out of the workforce with their domestic lives and sanity intact, chances are they’ll manage the decades ahead in a relatively calm state. They won’t have got that far if they hadn’t learned to be relaxed about dipping into each other’s money and managing a household budget.

For women who outlive their male partners (and most will) or enter retirement solo, things are different. They will be hoping the government is serious about solving a very difficult problem. Women live longer than men, which means longer on a government pension when their own savings have run out. This is serious.

Disclaimer
Intelligent Investor provides general financial advice as an authorised representative under the AFSL held by InvestSMART Publishing Pty Limited (Licensee). InvestSMART Funds Management Limited (RE) is the responsible entity of various managed investment schemes and funds and is a related party of the Licensee. The RE may own, buy or sell the shares suggested in this article simultaneous with, or following the release of this article. Any such transaction could affect the price of the share.

Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles