How can women maximise their retirement savings?

The government still has more to do to help women grow bigger nest eggs. In the meantime, there are a few simple strategies that can boost a low balance.

Women retire on less than men. Lower pay, time out of the workforce to raise children and being head of a single-parent household all make it hard for women to close this super gap. With more and more women retiring in poverty, it’s important not only for women to take charge of their super but also that federal measures come into place to solve this problem.

The median super balance for a woman in her early 60s is just $146,900, lagging the male median of $204,200. Both men and women have less than ASFA’s Retirement Standard benchmarks of what is required to have a comfy lifestyle in retirement – $545,000 for a single person.

Australian Taxation Office (ATO) data, analysed by Industry Super Australia, showed the gender rift is widest in Western Australia, where the typical woman has 38% less super than a man. Northern Territory women have the smallest amount of super, with a median balance of just $40,900, followed by women in Western Australia with $45,200. Women in the ACT, which has a higher percentage of public-sector workers, earning 15% super, have a comparatively healthy $72,400 median super balance.

There are several Federal Budget measures that could be implemented to help close the super gap. While some of these were included in the 2021/22 Federal Budget, others, such as paying super on the government’s paid parental leave (PPL), were simply left out.

Industry Super figures showed that if the government had moved to extend the Superannuation Guarantee (SG) to women under the government’s PPL scheme, it would have topped up eligible mums’ super by around $1,400 for each child, and that amount would grow to an estimated $13,500 over their working lifetime.

What the government is doing to close the gap

So what moves has the government made to help women close the super gap?

More money coming into your fund

More money should have flowed into your super from 1 July, with employer super guarantee contributions rising from 9.5% of your base wage or salary to 10%. For a woman on the average female weekly wage of $1,562, it means close to an extra $8 going into your super each week. It may not sound like much, but for a 30-something it could add an extra $16,000 to your super by retirement age.

Better still, a further increase of 0.5 percentage points in employer contributions is scheduled for each July until they reach 12% from 1 July 2025.

Unfortunately, for some people, the increase in the SG will mean a cut to their take-home pay.

Super to be paid on every dollar earned

The removal of the $450 monthly income threshold for receiving SG payments will kick in on 1 July, 2022. While this won’t plug the gap, it will go some way to putting more dollars away for not just women but anybody working in the gig economy.

Currently, employers do not need to pay superannuation for employees who earn less than $450 a month. Removing the threshold could see a 30-year-old part-time employee earning $400 a month $57,385 better off at retirement according to calculations by Canstar.

→ Related: $450 monthly super threshold to be scrapped: What it may mean for your balance

What you can do to close the gap…

There are also a number of things that you can do to help boost your super. Making the most of government perks such as the co-contribution or spouse rebate can be a great way to start.

Take advantage of the super co-contribution

There are government perks already in place that can help you boost a low super balance. If you’re a low- or middle-income earner and make personal (after-tax) contributions to your super fund, the government may make a co-contribution up to a maximum of $500.

To get the maximum co-contribution, you have to make a $1,000 non-concessional super contribution – that is, a contribution paid from your after-tax income that doesn’t give you any tax deduction. For the 2021/22 financial year, the maximum co-contribution is payable to those whose incomes are less than $41,112. It reduces gradually until it phases out entirely when your income hits $56,112.

Success with this tip comes down to planning ahead. Often it can be hard to come up with $1,000 as a lump-sum payment. It’s a lot easier (and less painful) if you start taking $20 from your weekly pay and putting it into super. Do this at the beginning of each financial year and you’ll have the $1,000 deposit needed to get that 50% guaranteed return. You can use the ATO’s super co-contribution calculator to estimate your co-contribution entitlement and eligibility.

Get your spouse to top up your super

Then there’s the spouse contribution. If you’re a low-income earner or not working, your super is taking a hit. The spouse contribution can help you boost your wealth and they get a tax perk, too. For your spouse to be eligible for the full tax offset of $540, your income needs to be $37,000 or less and they need to contribute a minimum of $3,000 into your fund. The tax offset amount reduces when your income is greater than $37,000 and completely phases out when your income reaches $40,000.

The spouse contribution tax offset is available even if you’re in a de facto relationship.

Make the most of bring-forward or carry-forward rules

You may also be able to take advantage of bring-forward or carry-forward arrangements to play catch up when you have some extra money to add into super.

The bring-forward rule allows you to make up to three years’ worth of non-concessional (after-tax) contributions to your super in a single income year, which means you can put up to $330,000. Eligibility depends on your age and your total super balance on 30 June of the previous financial year.

The carry-forward rule lets you access unused concessional cap amounts from previous years. To use your unused cap amounts your total super balance at the end of 30 June of the previous financial year has to be less than $500,000. You must have also made concessional contributions in the financial year that exceeded your general concessional contributions cap.

Get rewards paid into your super when you shop

Super generally only works if you’re working. But if you find yourself between jobs or taking some time out to raise a family, you can still add to your super, even if you don’t have an income. There are several cashback sites, such as Super-Rewards, Boost your Super and Longevity, that you may be able to link to your chosen super fund. Once you do, every time you shop using those sites – whether you’re getting the groceries or buying shoes – you will get cash rewards paid into your super account.

You’ll need to make your purchases through these super reward platforms to earn your cashback. Typically, you can expect around 2%–3%.

There are a few potential traps to watch out for:

• If you have to move your super into another fund to get certain features, make sure you do your homework. To be worthwhile, the fund must stack up well.
• As you need to shop at particular retailers to benefit from cashback offerings, make sure you aren’t paying more than necessary.
• Ensure you stay under any contribution caps. Most of these options are likely to fall into the non-concessional contribution category, and an annual cap of $110,000 applies to these types of contributions.

Give your super fund a health check

One way you may be able to potentially boost your super that doesn’t require you to add in a cent is to give your fund a health check. That means taking a close look at factors like how your fund has been performing over the long term and if the fees you’re being charged are reasonable.

You might be surprised at the difference that fees can make over the long term. As a hypothetical example, Canstar looked at how the super balance of a 25-year-old might vary at retirement depending on whether they paid annual fees of 0.75% or 1.50% of their balance. This was based on an average starting income of $74,516, 2.5% inflation (on average) each year, and average investment returns of 6.85% a year.

In this scenario, someone paying 0.75% of their balance in fees would have $159,396 more at retirement than someone paying 1.50%.

→ Related: Top performing super funds on Canstar’s database

Track down any lost super

There are a surprising number of lost super accounts sitting with the ATO and it’s fairly simple to see if one of them belongs to you. You might end up finding super that you didn’t realise you had.

Check if your fund offers any parental leave perks

If you have a baby and are taking parental leave it’s worth checking if your fund offers any perks. There are many funds that either waive insurance fees for death, total and permanent disability (TPD) and income protection for up to 12 months – or charge zero administration fees – to members who are on parental leave.

For example, HESTA members can get up to a 12-month break from paying insurance fees while they’re on parental leave. Hostplus members can enjoy insurance cover without the cost for up to 12 months of parental leave and CareSuper members on employer-approved parental leave can request a waiver of their insurance fees for death, TPD and income protection cover for up to 12 months. This means, if you’re eligible, your insurance cover can continue while you’re on parental leave, at no cost to you.

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