Bridging the Gender Gap: Improving Retirement Outcomes for Australian Women

Key Takeaways

• The gender pay gap, broken work patterns for caring responsibilities and part time work are key contributors to the superannuation gender gap at retirement. In 2017-18 there was a $65,551 gap between the average superannuation balances for women and men.¹
• This is particularly concerning given women are expected to live longer than men (85.3 years for women versus 81.2 years for men)², which translates to women requiring a greater amount of retirement savings to finance their retirement years.
• In addition, research from ASFA (2019) notes that approximately 1 in 4 women are retiring with no superannuation.³
• Women also felt the impact of the COVID-19 pandemic, with $15.9B being withdrawn from super by women through the COVID-19 early release of superannuation program.⁴
• In general, women rely more on the Age Pension in retirement, due to their lower savings and higher life expectancy.
• From a superannuation fund perspective, communication with members remains a key consideration when improving the financial literacy and retirement outcomes for females in Australia.  Understanding specific member demographics through cohort analysis (including the female cohort of members) is important in being able to both communicate effectively with members and design appropriate and tailored retirement solutions for the fund’s membership.

Introduction

In 2017-18, the average balance for those with superannuation at age 60-64 was $279,167 for women and $344,718 for men — a gap of 19 per cent ($65,551). The median balance was $128,507 for women and $163,985 for men — a gap of 22 per cent ($35,478).¹ In addition, research from ASFA (2019) notes that approximately 1 in 4 women are retiring with no superannuation.³

The charts below, from the Treasury’s Retirement Income Review (2020), outline the gender gap in superannuation balances across different age groups. The gap closes sharply from around age 55-59, however Treasury noted that this is likely due to the average superannuation balances not including individuals with zero balances, and women making more voluntary superannuation contributions than men in later ages.

Source: The Australian Government the Treasury, 2020, Retirement Income Review – Final Report, viewed 23 February 2022, https://treasury.gov.au/publication/p2020-100554. The Chart contains Treasury analysis of ATO individual income tax returns and member contributions statements, 2017 18.

Reasons for the Superannuation Balance Gender Gap

Gender Pay Gap

The national gender pay gap is calculated by the Australian Government’s Workplace Gender Equality Agency and measures the difference between the average earnings of women and men in the workforce. It is the difference between the pay of women and men, on average, across organisations, industries, and the workforce as a whole.⁵  Australia’s national gender pay gap is currently 14.6% for full time employees (base salaries) and 22.8% when including full time, part time and casual workers (and including superannuation, bonuses and other payments). 

Research conducted by the Australian Government’s Workplace Gender Equality Agency highlights the following factors that influence the gender pay gap:

• conscious and unconscious discrimination and bias in hiring and pay decisions;
• women and men working in different industries and different jobs, with female-dominated industries and jobs attracting lower wages;
• lack of workplace flexibility to accommodate caring and other responsibilities, especially in senior roles;
• high rates of part-time work for women;
• women’s greater time out of the workforce for caring responsibilities impacting career progression and opportunities; and
• women’s disproportionate share of unpaid caring and domestic work.⁶

Treasury conducted further analysis in its 2020 Retirement Income Review, based on data from the ATO which is at the population level, not a sample level, that takes into account entire earnings and if a person works part time or casually.  This analysis paints a more dire picture, with a 31.4% working life earnings gap between men and women (when including part time and casual workers), a 32.6% superannuation balance at retirement gap, and a 9.6% average annual retirement income gap.¹

Career Breaks and Part Time Work

For women who take time out of the workforce for parental leave, employers are not required to make superannuation contributions for parental leave pay. In addition, women who take career breaks to become unpaid carers also receive no superannuation.

Impact of the COVID-19 Pandemic on balances

Women also felt the impact of the COVID-19 pandemic, with $15.9B being withdrawn from super by women through the COVID-19 early release of superannuation program.⁴  Furthermore, women experienced the bulk of the cumulative losses in employment throughout the first twelve months of the pandemic from March 2020 to February 2021  and women reported a greater share of caring responsibilities during the pandemic.⁸

Other Factors

Treasury’s Retirement Income Review also noted that divorce (and the division of superannuation assets in family law property settlements decisions) and financial literacy may both be other contributing factors to the superannuation gender gap at retirement.

Implications for Retirement Income

Whilst it is important to understand the superannuation balance gender gap, it is also important to understand the impact on retirement income.

• Women are expected to live longer than men: The life expectancy at birth in 2016-2018 for females is 85.3 years as compared to 81.2 years for males².
• Age Pension: Due to their lower savings and higher life expectancy, women generally rely more on the Age Pension in retirement.
• Marital Status and home ownership status can impact the Age Pension entitlement and retirement outcomes. Women who are single and renters in retirement are at risk of poor economic security in retirement.

Strategies to Improve Retirement Outcomes

Government Policy

Superannuation during parental leave (including Government paid parental leave)

There is currently no requirement for employers to make superannuation contributions for parental leave pay, although pleasingly, some employers have started to pay superannuation during periods of parental leave. From a Government policy perspective, having a requirement for superannuation to be paid on both employer-funded parental leave, as well as government paid parental leave would be a positive step in improving retirement outcomes for working women.

Normalising parental leave for men would also help women to return to the workforce earlier and help to close the gender gap.  While the Workplace Gender Equality Agency notes that there has been an increase in the uptake of primary carer’s leave by men, men are still less likely to use these benefits.

Changes to the Superannuation Guarantee

The Superannuation Guarantee rate is currently at 10% with an incremental 0.5% annual increase in SG rates to 12% by 2025. Increasing the SG to 12% earlier could improve the average women’s superannuation balance at retirement.

$450 threshold abolished

Women in Super noted that estimates show around 220,000 Australian women were missing on around $125 million of superannuation contributions each year due to not satisfying the $450 monthly earnings threshold.⁹  It is pleasing to see that the $450 per month income threshold under which employees do not have to be paid the superannuation guarantee by their employer was abolished earlier this year.

Carer’s credits

There has been discussion in the industry about carer’s credits which have been implemented in overseas markets. Carer credits are used to factor in the time taken out of the workforce to care for others when determining a person’s retirement income benefit.  If considered in Australia, a carer’s credit mechanism would need to be tailored for the unique nature of the Australian market and our Age Pension system.

Strategies that superannuation funds could consider

Communications with members (including encouraging members to seek advice)

Studies have shown that women (on average) have lower financial literacy than men.

• Education and engagement:  Education and engagement strategies to improve financial literacy of superannuation fund members, particularly females are of key importance. The role of technology in engaging members, particularly younger members could also be considered.
• Role of Advice and Guidance: Providing members with the option to seek financial advice and guidance is also vital.

Cohort analysis – understanding the female member cohort

In JANA’s experience understanding specific member demographics and different cohorts such as the female cohort of members, is important in being able to both communicate effectively with members and design appropriate and tailored retirement solutions for the fund’s membership.

JANA’s specialist retirement team have developed capabilities that allow for the effective modelling of these different cohorts to better understand and then plan for improving retirement outcomes. For women who are typically retiring with less income, this is particularly important.

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_{¹ The Australian Government the Treasury (2020), Retirement Income Review – Final Report, viewed 23 January 2022, https://treasury.gov.au/publication/p2020-100554
²  Australian Bureau of Statistics (2021), 3302055001DO001_20182020 Life Tables, 2018-2020, Life Tables, Australia, 2018-2020, viewed 26 February 2022, https://www.abs.gov.au/statistics/people/population/life-tables/2018-2020#data-download
³  ASFA, 2019, Better Retirement Outcomes: a snapshot of account balances in Australia, viewed 23 February 2022, https://www.superannuation.asn.au/ArticleDocuments/359/1907-Better-Retirement-Outcomes-a-snapshot-of-account-balances-in-Australia.pdf.aspx?Embed=Y
⁴ Australian Tax Office (2020), COVID-19 Early release of super report (20 April – 31 December 2020), https://www.ato.gov.au/uploadedFiles/Content/SPR/downloads/covid19_early_release_of_super_report_infographic.pdf
⁵  Workplace Gender Equality Agency (2022), Australia’s gender equality scorecard: Key results from the Workplace Gender Equality Agency’s 2020-21 employer census, February 2022, https://www.wgea.gov.au/sites/default/files/documents/2020-21_WGEA_SCORECARD.pdf
⁶  Australian Government Workplace Gender Equality Agency 2021, Australia’s Gender Pay Gap Statistics, viewed 23 February 2022, https://www.wgea.gov.au/publications/australias-gender-pay-gap-statistics
⁷  Risse, L (RMIT University) and Jackson A (Equity Economics), 2021, Australian Journal of Labour Economics Volume 24, Number 2, 2021, A gender lens on the workforce impacts of the COVID-19 pandemic in Australia, https://research.curtin.edu.au/businesslaw/wp-content/uploads/sites/5/2021/10/AJLE242risse.pdf
⁸  Australian Government Workplace Gender Equality Agency 2020, COVID-19 and the Australian workforce,https://www.wgea.gov.au/sites/default/files/documents/COVID19_Australian_workforce_2020_0.pdf
⁹ Women in Super, viewed 27 February 2022, https://www.womeninsuper.com.au/content/removal-450/gjuq2x?permcode=gjuq2x}