Why do women retire in poverty?

In Australia, women retire with half as much superannuation as men, and considering that retirement income is one of the most important influences on quality of life, this disparity places women on the back foot, financially and socially.

In a 2014 Association of Superannuation Funds of Australia (ASFA) report, it was revealed that in 2011/2012 the average super balance for men at the time of retirement was $197,000. This figure was almost half for women, at $105,000.

While, on average, over the last 10 years super balances have increased, women still hold only 37 per cent of Australia’s total superannuation savings, compared to 63 per cent for men. However, a large majority (60 per cent) of women aged 65–69 have no superannuation at all.

A number of underlying factors contribute to the existence of this superannuation disparity. In Australia the gender pay gap is a significant factor. According to the Government’s Workplace Gender Equality Agency Report in May 2015, women earn on average $298.10 less per week than men, equaling a 17.9 per cent pay gap. Year on year, this pay gap amounts to a difference of $15,000.

Additionally, as a result of pervading stereotypes about the type of work women and men ‘should’ do, women remain the primary caregivers for family members. Women are therefore more likely than men to experience prolonged periods away from the workforce, as well as undertaking, part-time, casual and unpaid work.

In the case of acquiring more than one part-time job, women may pay a higher tax rate on second and subsequent incomes. As a result of these factors, the earning capacity and super contributions of women are severely reduced.

While these statistics reveal the economic nature of the super imbalance, the human consequences of the issue expose it as a social crisis. Despite the fact that women typically live longer than men, they often end up struggling financially throughout retirement.

A report released by Westpac in May 2015 found that a woman earning $53,700 per year would need to work until the age of 74 to retire with as much super as the average Australian man. Startling data reveal that, even if a woman works full time for 40 years at average female earnings and contributes 15 per cent to superannuation, she is highly likely to outlive her super.

The Australian Council of Social Service (ACOSS) released a report called Poverty in Australia 2014 that found that women are at a greater risk of experiencing poverty than men. Of Australians living below the poverty line (calculated at $400 per week for single adults), 53.7 per cent are women, while 46.3 per cent are men. Single mothers, single people over 65 years of age and those living in households mainly reliant on social security are particularly at risk.

So, what can be done?

Thanks to increased focus on the gender pay gap in both the political and social spheres, the superannuation disparity is now receiving more attention.

In July, the ANZ bank publicly highlighted the super issue when it announced a new policy that offered free financial advice to women who have less than $50,000 in super. The bank is also doing its part to bridge the superannuation divide by offering its female staff an additional $500 per years a contribution to their super fund. While this may seem like a small offering, it represents an enormous step in the right direction.

Politicians are also recognising the problem. In December last year, Greens MP Adam Bandt backed a bill proposed by ASFA that would allow employers to boost superannuation payments to female employees. He acknowledged that women have lower employment outcomes and wages, a higher likelihood of being in unpaid caring roles and reduced retirement income. Despite the Government’s refusal to support the bill, it represents a greater political emphasis on the issue.

Until further policies are put in place, the current ‘official’ advice given to women is to secure their super by taking it upon themselves to invest.

In addition to the phased increase in the rate of the Superannuation Guarantee Contribution to 12 per cent (by 2025) and the Low Income Superannuation Contribution (LISC), the Government’s co-contribution scheme is the main way for women to boost their super. In this scheme, the Government makes a bonus contribution for every voluntary contribution made by an individual. However, eligibility for the scheme is capped at being less than 71 years old and earning less than $50,000 per year.

While the scheme can benefit women on low incomes, it doesn’t address the superannuation crisis experienced by so many others. Additionally, the LISC payment may be phased out.

The continuing superannuation gap between women and men exemplifies the gender inequality still experienced by Australian women. While we have seen significant social and cultural shifts that have allowed women to receive many of the same benefits as men, there remains a stark contrast in the financial welfare of women in comparison to men. In order for this to be resolved, we need representative bodies to continue pushing forward official policies that ensure equal pay and higher super incomes for women.

By protecting the interests of women and men alike, we will have the best possible chance to ensure each individual can experience a dignified retirement.

Written by Amelia Theodorakis

A writer and communications specialist with eight years’ in startups, SMEs, not-for-profits and corporates. Interests and expertise in gender studies, history, finance, banking, human interest, literature and poetry.

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