Super and the gender gap: closing the retirement savings divide

Women generally retire with less money than men. But individuals can take action to close the gap.

With Australia’s retirement savings approaching the $4 trillion mark, it’s fair to say that superannuation has, generally speaking, been a great success. But it’s working better for men than for women.

Taking control of your financial future starts with getting to know your super.Credit: iStock

“Australia’s superannuation system, despite its intent to secure a comfortable retirement for all, continues to fall short for women,” says Dr Natalie Peng, a lecturer in accounting at the University of Queensland Business School. “The gender gap in superannuation remains stark.”

Women have lower super balances than men across every age bracket, and as they approach retirement, their median super balance is about 25 per cent lower than men’s.

This can exacerbate financial vulnerability for women in later life, Peng says. “The gendered nature of superannuation shortfalls raises serious questions about fairness, financial equity, and how we can better prepare women for their post-working years.”

Pay and parenthood

One reason for the super gender gap is the 11.5 per cent pay gap between the male and female full-time average wage. For every dollar that men earn, women earn 89 cents, which adds up to $231.50 less a week, or $12,038 less a year. Women are also more likely to be employed part-time and casually, increasing the pay gap further.

Then there’s the fact that women tend to have career breaks to have and care for children, reducing not just the amount of super contributions they make, but the powerful compounding effect of interest on those contributions. It’s something that Kelly Power, the CEO of superannuation at Colonial First State, has experienced first-hand.

“I had my first child when I was 25, around the same time my career in financial services was just beginning,” Power says. “Back then there was no awareness or education about the gender super gap. I didn’t know that simply being a woman and having children would leave me with less money in retirement than if I was a man.

“Today I’m a mother of three daughters and these issues are particularly close to my heart.”

Closing the gap

Attempts are being made to close the gap. The federal government recently announced that it would pay the superannuation guarantee on paid parental leave from 2025.

“This is a huge win for Australian women,” Power says. “It’s a landmark development that will bring Australia closer to equity in the superannuation system.”

Power also welcomes proposed reforms aimed at making financial advice more accessible and affordable.

Peng points to the removal of the $450 monthly income threshold for super contributions as also being of benefit to women ­­– since 2022 employers have had to pay the super guarantee no matter how much an employee earns. However, she believes reforms still have a long way to go.

“The current system lacks robust mechanisms to allow women to catch up on missed contributions due to caregiving or part-time work,” she says.

In the meantime, there’s plenty that individuals can do to close the gap.

Take control

Taking control of your financial future starts with getting to know your super, Power says. “Log in to your account and check your super balance,” she says. “See how your super has performed over the last 12 months. If your super is underperforming, it may be time to consider switching to a different fund.”

If you have multiple super funds, consolidating them into one fund can save on fees, Power says (though you should check that you aren’t going to lose any important insurance by closing a fund – particularly if you have a pre-existing medical condition).

And while the current cost-of-living crisis may mean you don’t have a lot of spare money lying around, topping up your super by whatever you can afford can make a huge difference to your super balance down the track, Power says.

“A 25-year-old earning $60,000 a year could have $50,000 more for retirement by adding just $20 a week to their super,” she says.

Plan and take action

Peng says women and their partners should also consider taking advantage of government incentives, such as the co-contribution scheme for low-income earners, and spouse contributions, which offer tax offsets for the higher-earning partner when they contribute to the lower-earning partner’s super.

Joint retirement planning as a couple can be beneficial, Peng says, while women going through a divorce should ensure they negotiate a fair division of superannuation assets.

With women living an average of four years longer than men, it’s also important to plan for longevity, Peng says. “Women should consider using conservative withdrawal strategies and exploring lifetime income products to ensure their funds last throughout retirement.”

Power says the important message is that women should take action to make their super work for them. “Even though retirement may seem far away, your super is your money, and being actively involved in how it is managed will go a long way to helping you build wealth and achieve your retirement goals, whatever they may be.”

To learn more, visit cfs.com.au