The Gender Superannuation Gap: Let’s close the pay gap or women will retire poorer than men for decades to come
Posted: Friday 29 May, 2015
International Women’s Day gives all of us pause for celebration about how the world has changed for the better for many Australian women. We have a growing voice in the big debates, more seats at the table in politics and workplaces and a real say over the way we choose to live our lives.
From a stronger vantage point, we are also better placed to spot unfairness when we see it and demand action to fix it.
During the week, the latest ABS stats showed that the pay gap between men and women stubbornly refuses to close and sits at 19%.
Galling as this is, the pay gap during working life then translates into a yawning superannuation gap of 47% on current estimates.
Women are currently retiring with an average $90,000 less than men and 29% of women over 65 live below the poverty line.
Too many women are still receiving a smaller pay packet – and therefore a smaller amount of super – than their male counterparts, for performing the same or comparable work.
Because the super contribution is invested and compounds over the long term, the pay gap converts into an even bigger super gap for women.
Several generations of working women are already facing a significant disadvantage in their retirement savings, because Australia’s gender pay gap has been stuck between 15% and 19% for two decades.
The current 47% super gap translates into an average superannuation balance at the time of retirement for women of $105,000 and $197,000 for men.
By 2030, the gap is still expected to be 39% with average balances projected to be $262,000 for women, and $432,000 for men.
A number of other factors contribute to poorer retirement outcomes for women.
Fragmented patterns of paid work when women take primary responsibility for family care have a sharp impact. For example, taking 5 years off work from age 29 to 34 is estimated to shave a further $100,000 off women’s average retirement savings.
Further to this:
- a majority of part-time and casual workers are women in generally lower paid positions
- women disproportionately work in occupations such as administrative, community services and sales which historically pay less than male-dominated occupations
- fewer women occupy senior executive and board-level positions
- women typically retire earlier than men on average and live longer than men – up to 4.4 years longer for a female born today
As a starting point to ensure that women are not left even further behind in their retirement savings, the Low Income Super Contribution (LISC) should be retained beyond 2017.
The LISC is a tax rebate paid into super accounts and ensures 3.6 million Australians who earn less than $37,000 a year and are taxed at 15% or less, receive a tax concession of up to $500 a year on their super contributions. Nearly half the women (45%) in the Australian workforce are eligible for this payment which would make a huge difference to their nest egg in retirement year. For example, it is estimated a women starting out on the minimum wage, with modest wage increases, would have a super balance 10% higher at retirement because of the LISC.
Given that the rest of the workforce receives tax concessions on super contributions, it is nonsensical that the lowest paid Australians, most of whom are women, pay more tax on their super than on their take home pay.
But this is just a starting point.
Policy action to close the super gap should be a top, bipartisan priority for our politicians this year. In particular, policy debate and consultation around the Tax White Paper affords a huge opportunity to consider ways to significantly improve women’s retirement incomes.
After a lifetime of working and caring for family, no Australian woman should be retiring in poverty.