Not only is the gender pay gap a well-known problem disadvantaging women for many years, the superannuation gap between men and women is also becoming increasingly apparent. According to Women in Super, women are retiring with 47% less super than men.
Lower wages are a key factor as to why women retire with significantly less super; however it is not the only factor. Here we explore what life events affect women’s superannuation balances, including divorce and parental leave.
Why are women at a superannuation disadvantage?
There are significantly more women than men who engage in casual and part-time work. This means that it is harder to meet the income threshold of $450 a month that the Government currently has imposed for superannuation payments to be made. As a result, women who have various occupations in a part time or casual role are at risk of not receiving monthly superannuation payments.
In Australia, women tend to be the primary carers of children and other family members who have a disability. Women in Super states that ‘women take an average of five years out of the workforce to care for children and work part time’. A solution to this would be to allow women to have more flexible working arrangements from home in the event that they are unable to physically attend their place of employment.
Paid parental leave and superannuation
Women are further disadvantaged when they go on paid parental leave because no superannuation is paid throughout this period - employers are not required to do so. This is the case even though employers make superannuation payments for every other type of leave. The absence of consistent superannuation contributions means that women have significantly less when they retire.
The current taxation system set in place by the Government considerably favours high income earners. This means that out of the $30 billion spent annually on super tax concessions, almost nothing goes to the bottom 30 percent of income earners, the majority of whom are women.
Ways to boost your superannuation whilst on parental leave
(This is only general advice, please seek financial advice in regards to boosting your superannuation fund)
Contribution splitting This simply means that the partner that continues in full time paid employment gives the partner taking care of the children some of the super they earned during the year. There are also tax benefits by doing this.
Spouse contributions Your spouse is able to contribute to your super fund after-tax and this could also mean a tax offset for them.
Government co-contribution Whilst on maternity leave you would most probably be classified as earning a low income and could be eligible for government co-contribution. The catch is you do need to be able to self-contribute to your super fund.
Regardless of the amount, small contributions for a long period of time can significantly change the final retirement amount. Additionally, each super fund has a different fee structure, so it is advisable to engage in further research to determine which policy and structure best suits you on an individual basis.
Divorce and the impacts on women’s Superannuation balances?
Superannuation splitting laws were only introduced in 2001. This change in the law has made it possible for superannuation balances to be divided as part of family law property settlements. Superannuation is considered to be an asset, along the same lines as property, and as such can be divided between partners by agreement or court order.
The rules are uniform across the country, with one exception. Western Australia is the only State where different rules apply to de facto couples.
If you are going through a divorce or separation be sure to review your nominated beneficiaries on your Super account to remove your ex-partner from your account. The end of a relationship shouldn’t mean the end of your financial viability.
There are some steps you can take to ensure that you feel in control of your situation.
- Take stock of your financial situation: know what bills you have coming up and know what debts you have owing jointly. Ensure you have access to all joint accounts and access to any financial statements you may need. It is good to have a clear understanding of your own super balance during this time.
- Have a clear understanding of your partner’s super balance: you may not know but you are entitled to ask your partner’s super fund to provide this information if your partner won’t. To reach a fair agreement and settlement it is important to know the balance of your partner’s super account.
- Financial advice is paramount: seeking financial advice can provide you with knowledge and guidance to make the best choices for your individual situation.
- Seek legal assistance: At Shine Lawyers we have an expert Family Law team who understand the complexities of the legal system and will work together with you to get the best outcome for your situation.
Written by Shine Lawyers. Last modified: February 28, 2020.