Women and Superannuation: Closing the Gender Gap in Retirement Savings

Australian women retire with significantly less superannuation than men, creating a retirement savings gap that can leave many facing financial insecurity in their later years. Research consistently shows that women retire with approximately 25 to 40 per cent less super than their male counterparts. This comprehensive guide explores the causes of this gap and provides practical strategies that women can implement at any stage of their careers to build stronger retirement outcomes.

Understanding the Superannuation Gender Gap

The superannuation gender gap is the difference between the average super balances of men and women at retirement age. According to recent data from the Australian Bureau of Statistics, the median super balance for women aged 60 to 64 is approximately $168,000, compared to around $222,000 for men in the same age bracket. This gap of over $50,000 can translate to years of reduced retirement lifestyle or increased reliance on the Age Pension.

Several interconnected factors contribute to this disparity. The gender pay gap means women typically earn less than men throughout their careers, resulting in lower Super Guarantee contributions from employers. Career breaks for caring responsibilities, which still predominantly fall to women, create periods of zero or reduced super contributions. Additionally, women are more likely to work part-time or in casual roles, further reducing their superannuation accumulation. These factors compound over a working lifetime, with the gap widening significantly due to lost compound growth on the missed contributions.

The Impact of Career Breaks on Retirement Savings

Career breaks for raising children or caring for elderly relatives have a profound impact on superannuation balances. A woman taking five years out of the workforce in her early thirties not only misses out on employer contributions during that period but also loses decades of compound growth on those missed amounts. Research suggests that a five-year career break can reduce final retirement savings by 10 to 15 per cent, even if the woman returns to full-time work afterwards.

The situation is often compounded by women returning to part-time work after a career break, which many do to balance work and family responsibilities. Part-time work means proportionally lower salary and therefore lower super contributions, extending the impact of the initial career break indefinitely. Some employers now offer superannuation on paid parental leave, but this is not universal, and unpaid parental leave typically comes with no super contributions at all. Understanding this impact is the first step toward taking action to address it.

Strategies for Women to Boost Super Balances

There are several practical strategies women can use to close the super gap, regardless of their current career stage. Spouse contributions are a powerful option for couples where one partner has a lower income or is not working. The higher-earning spouse can contribute up to $3,000 per year to their partner's super and receive a tax offset of up to $540. This not only builds the lower-earning spouse's balance but also provides an immediate tax benefit for the contributing partner.

The government co-contribution scheme is particularly valuable for lower-income earners. If you earn less than $60,400 per year and make personal after-tax contributions to your super, the government will contribute up to $500 directly to your fund. This is essentially free money that can significantly boost retirement savings for part-time workers or those on lower incomes. Additionally, consider using catch-up contributions if you have unused concessional contribution caps from previous years. Since 2019, individuals with super balances under $500,000 can carry forward unused cap amounts for up to five years, allowing for larger tax-effective contributions when income increases or when returning to full-time work.

Negotiating Super as Part of Your Employment Package

Many women overlook superannuation when negotiating employment terms, but it can be a valuable component of your total remuneration package. Some employers are willing to contribute above the minimum Super Guarantee rate, and this can be worth more than an equivalent salary increase due to the tax advantages. When negotiating a new role or promotion, ask about additional super contributions alongside salary considerations.

During parental leave discussions, specifically enquire about whether your employer pays super on paid parental leave and whether they offer any super contributions during unpaid leave. Some progressive employers are now providing continued super contributions during parental leave as part of their efforts to support gender equity. If your employer does not currently offer this, consider raising it as a workplace policy suggestion. Every additional contribution during these critical career periods helps reduce the long-term super gap. Use our superannuation calculator to model how additional employer contributions could boost your retirement balance.

Reviewing Insurance and Investment Options

Women should pay particular attention to the insurance held within their superannuation, as default cover may not be appropriate for individual circumstances. Many super funds provide default life insurance and total and permanent disability cover that may be insufficient for women who are primary breadwinners or who have significant family responsibilities. Conversely, paying for excessive insurance coverage erodes your super balance through unnecessary premiums.

Investment options are equally important to consider. Women tend to have lower risk tolerance and may gravitate towards conservative investment options, but this can significantly reduce long-term returns, especially for younger women with decades until retirement. Research shows that the difference between a conservative option returning 5 per cent annually and a growth option returning 7 per cent can mean hundreds of thousands of dollars difference in final retirement balance over a 30-year period. Consider your true investment timeframe, which extends to when you will actually need to draw on your super in retirement, not just to when you stop working.

Planning for Single Retirement

Statistics show that women are more likely than men to be single in retirement due to higher life expectancy and higher rates of divorce later in life. The Association of Superannuation Funds of Australia estimates that a single woman needs approximately $595,000 in superannuation at retirement age to fund a comfortable lifestyle, assuming home ownership and part Age Pension. Women who are currently in relationships should not assume that their partner's super will provide for their retirement, as circumstances can change.

Building financial independence through your own superannuation balance is crucial regardless of your current relationship status. This means being actively engaged with your super rather than leaving it as a passive afterthought. Know your current balance, understand your investment options, check that your contributions are being paid correctly, and regularly review whether you are on track for your retirement goals. Financial literacy and engagement with your super fund are among the most powerful tools for ensuring your retirement security.

Conclusion

The superannuation gender gap is a significant but not insurmountable challenge for Australian women. By understanding the factors that contribute to the gap and taking proactive steps to address them, women can significantly improve their retirement outcomes. Whether through spouse contributions, government co-contributions, catch-up contributions, or simply being more engaged with super decisions, every action helps close the gap.

The most important step is to start taking action now, regardless of your age or current super balance. The earlier you begin addressing the gap, the more time compound returns have to multiply your efforts. Speak with a financial advisor about strategies specific to your situation, and use tools like our superannuation calculator to model different scenarios and track your progress toward a secure retirement.