Balance Super for Better
- On 14/03/2019
Last Friday was International Women’s Day and this year’s theme is to balance the scales to overcome gender inequality. There is now a global movement to seek to address past inequalities – communities now expect there to be a balance and will call out its absence and celebrate its presence.
Unfortunately, despite industry efforts over many years, superannuation balances remain distinctly unbalanced. We describe the difference between male and female average balances as the superannuation gender gap. This is demonstrated in Graph 1 which charts the average balance of superannuation accounts owned by women relative to the account balances of their male counterparts as at 30 June 2017¹. The clear theme is that women have consistently lower average account balances than men at all ages, with a clear decline from the child-bearing ages.
Graph 1. Female average balances as a percentage of males
Unfortunately, this trend is exacerbated, as statistics show that women retire earlier than men, and live nearly three years longer, giving them a longer period in retirement over which to spend their retirement benefit.
The superannuation gender gap derives from many factors – lower salaries as well as lengthy career breaks and periods of part-time work.
Rice Warner’s Super Insights research, an annual sample of over 10 million superannuation account records suggests that on average, males have higher salaries than female across all ages. This is reflected in Graph 2 which charts the average estimated salary of men and women based on the Superannuation Guarantee (SG) contributions that are paid into their accounts. Graph 2 reflects that the difference grows more prominent as an individual enters their late 20’s and continues to grow well into their 30’s. While there are many potential reasons for this, one leading reason may lie in the tendency of women to take career breaks to raise children during a period when they would otherwise have received promotional opportunities.
Graph 2. Average estimated annual salaries by age
Analysis of behavioural finance suggests that men invest more aggressively than women. If true, holding extra exposure to growth assets would lead men to have higher average retirement balances due to higher long-term returns. However, while Rice Warner’s data does confirm that males who elect an investment choice do invest slightly more in aggressive assets than females, the difference is minor and negligible in the context of the higher proportion of superannuants invested in the default investment.
There is some encouraging news. Our data shows there is evidence that women are making an active effort to close the gap through contributing to their superannuation. This is evident in Graph 3 which shows that the average voluntary contribution by females is typically higher than that of men in a similar age cohort, and markedly so closer to retirement.
Graph 3. Average member contributions
In the absence of immediate social change and equality, there are a range of strategies that women and their employers can adopt to help close the gap. These include:
- Leverage Low Income Superannuation Tax Offset (LISTO). Low-balance members can receive up to $500 in government contributions per year with females being favoured for these contributions as a result of their lower balances.
- Leverage government superannuation co-contribution. The government makes available $500 per annum to match contributions for low to medium income members who make personal contributions.
- Employers could pay SG contributions into superannuation on maternity leave to alleviate the impact of women taking time off work to care for children.
- Employers could pay higher SG contributions to female employees to draw attention to the superannuation gender gap and show that they are prepared to help to close it.
Despite these initiatives, closing the gender gap is likely to be an issue that will continue to require structural change and community action
¹ This research is based on Rice Warners’ Super Insights research based on over 10 million account records held in APRA funds at June 2018. While females in SMSFs have much higher average balances, these members are weighted to the top 20% of the population in terms of income and wealth.