Paul's Insights: The future face of poverty is female

A report by Monash University commissioned by AustralianSuper pulls no punches about the grim future many women could face in retirement.

Entitled, The Future Face of Poverty is Female, the study confirms that women face a number of financial challenges.

It all starts from about age 28. Up to this point there’s only a small pay gap between men and women. But after this, the gender pay gap widens – and not just because women often take time out of the workforce to raise children.  Women are more likely to work in part-time roles, and less likely to hold senior management or executive positions.

A key problem facing low income earners is what the report describes as the ‘double penalty’ effect on the amount of super a woman can accumulate in her working life.

A lower income means lower employer-paid super contributions (or none at all), and that means missing out on compounding returns, which are often most powerful when we start to grow super early in our working life.

The upshot is that women typically have 40% less in super than men. 

Projections of future super savings tend to be based on a continuous, linear, upward financial trajectory. In other words, steady work and a regular pay rise year after year. Clearly that’s not the case for all women.

The AustralianSuper report makes a number of policy suggestions including increasing the Low Income Super Tax Offset and removing the exemption from compulsory super for employees who earn less than $450 a month. But we can’t afford to wait for these changes – if they occur at all.

Women – and men – can take important steps to grow their super without having to spend a cent extra. And that matters when cash is tight.

First, pick the super fund that’s right for you looking at fund fees in particular. Let your employer know you want their contributions paid into this fund, then take your super with you from job to job.

Check if you have any lost super too. Casual workers and people who’ve held a few different jobs are most likely to have some forgotten super.

If you’re in a long term relationship, talk to your other half about a spouse super contribution. Your spouse or partner may be able to claim an 18% tax offset on super contributions up to $3,000 made to the fund of a non-working or low-income-earning partner. 

Every bit helps, and simple steps can help all Australians enjoy a better quality future.

Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.