New research to be released this week analyses two decades of Household, Income and Labour Dynamics in Australia (HILDA) Survey to estimate the actual labour force experience of women over their life and accounts for working when super is not paid.
The research reveals three-quarters of women are unlikely to retire having received a full 40 years of super contributions, and yet key government modelling assumes everyone retires with four decades of super.
Twenty per cent of women won’t receive 40 years of super
For the bottom fifth of female wage earners there is less than a 5% chance they will receive super for 40 years. Across all income percentiles women average just 30.1 years of contributions, the male average is 36.2 years.
It highlights a dramatic flaw in the Retirement Income Review base case modelling which assumes everyone receives 40-years of super contributions – leading to big overestimates in retirement balances.
The Retirement Income Review’s findings are being waved around by politicians to claim legislated increases in the Super Guarantee (SG) are unnecessary and should be cut or used for other purposes.
ISA’s research also accounts for those who fall into the $450 monthly threshold trap – when super is not paid to an employee who earns less than $450 a month. Women are far more likely to have multiple part-time jobs – which may all fall below the super contribution payment threshold. This threshold should be abolished.
Industry Super Australia strategic engagement director Gemma Pinnell says that it is time we bridged the gender gap in super. ‘More women than men are likely to receive a super guarantee increase, so lifting the rate is a crucial part of the solution.’
‘Until we fix inequities in the super system, like the outdated $450 threshold, we will continue to see women retiring with balances that are persistently lower than men.’
An average 12 years less in the full-time work than men
A recent retirement survey, commissioned by ISA, found that on average women spend 12 years less in the full-time workforce than men, this time away from work is having a dramatic impact on their super balance.
Previous ISA research shows that men have $282 billion more than women in their super funds.
Analysis of ATO tax file median balances reveals women retire with 36 per cent less super than men. But as the table below shows women have less super at every stage in life. Lifting the rate to 12% as legislated is a vital tool to lift women’s savings – with more women than men likely to receive the super rate increase.
The super balance gender gap begins to expand when a woman hits her 30s, the super balance gap increases from just under 7% in their late 20’s to almost 35 per cent once a woman reaches her late 40s (see table 1 below).
Men receive $12 billion more in employer contributions
Men also receive $12 billion more in employer contributions each year than women. One in three women retire with no super balance at all, according to a 2016 Senate report.
Industry Super Australia deputy chief executive Matt Linden says the modelling which is based on wrong assumptions, has real life ramifications. ‘Some wish to use the Retirement Income Review’s findings to cut super for millions who otherwise wouldn’t save enough for retirement.
‘This would be a terrible outcome as a more realistic working life pattern shows the current super rate is not adequate for most women to fund a secure retirement.’
The gender super gap at different life stages
|Female median balance||Gender