MLC’s Quarterly Australian Wealth Sentiment Survey, which gathered responses from over 2,100 Australians, has found that while more than half of all Australians expect to not have enough superannuation saved, women are significantly less optimistic about their retirement prospects than men.
According to the survey, men, on average, expect to have saved roughly $538,000 for retirement. Women’s expected savings are significantly lower at $390,000.
This gap in expected savings has mainly been attributed to more broken working patters. Approximately two-thirds of women in Australia left the workforce for more than two years after having children, whereas just one in six men have done the same.
In a boost for female superannuation prospects, the senate referred the economic security for women in retirement for a senate inquiry. The notion was passed and the first sitting will take place in March 2016.
A list of submissions for this inquiry can be found by clicking here.
A key feature of superannuation design is the assumption that members have long, continuous periods of employment. It designed to reward such members, and penalise those with interrupted employment.
Michael Drew, Griffith Business School
According to Professor Michael Drew, Professor of Finance, Griffith Business School, the career profiles of most Australian women are characterised by broken employment patters, as well as significantly lower average earnings than men. The result of these two variables is lower levels of superannuation.
“Inequality in labour market performance is bound to put Australian women at a serious disadvantage in terms of retirement. The superannuation system was historically developed by men with men in mind,” he observed.
Dr. Drew recommends setting considerably higher contribution rates for women in order to mitigate gender inequality in retirement.
The Australian Institute
While women make up 46% of the total workforce, they are only 39% of the fulltime workforce and 69% of the part-time workforce. According to The Australian Institute, as the majority of part-time workers, women face huge combined penalties through some or all of the following:
- Marginal tax rates
- Withdrawal of the Family Tax Benefit
- Withdrawal of parenting allowance
- The cost of child care
Women also represent 45% of all taxpayers in Australia, but are 57% of those in the low income tax brackets. Women are more likely to earn low incomes over their career, and have inadequate resources in retirement as a result.
The Australian Institute believes women’s retirement security could be improved by increasing the age pension.
PwC believes that simply increasing the super rate for women would not solve the issue, and is ill-advised. They believe that such an approach would entrench discrimination in the work force and act as a disincentive for employers hiring women, creating even greater disparity in the labour-market participation rates of women.
PwC states in their report that any potential solutions must address the drivers of inequality, not the symptoms. Rather than simply increasing the super rate, a long-term view must be taken, where the root causes of workplace inequality are identified and measures are taken to prevent them.
How the Parliament of Australia intends to improve women’s retirement security is unknown at the time being. It will be interesting come March 2016 to see what steps they decide to take.