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Not so super: Gender differences in superannuation
It is well known that women have lower super balances than men, reflecting historical and continuing lower rates of employment and earnings. Many women therefore rely on sharing their partner’s super for funding their lives in older age. But how many women and men currently have no super, what are the gender differences in super balances, and what happens if couples separate? Professor Laurie Brown crunches the numbers, and they're not pretty.
Superannuation is one of the three pillars of retirement income - the other two being the age pension and private savings. The Keating Government introduced the compulsory employer paid Superannuation Guarantee (SG) system in 1992 as a key measure in reforming retirement income policies in Australia. The minimum SG contribution from employers, initially set at 3%, has increased over time and since July 2014 employers have had to pay a minimum of 9.5% of the ordinary time earnings of eligible employees. To receive the SG, a worker must be aged 18 years or over; in full-time, part-time or casual employment where they earn $450 or more (before tax) a month; and be considered an Australian resident for tax purposes.
Since the introduction of the SG, there has been a significant improvement in the proportion of Australian adults who have super, but many still have zero balances. This primarily reflects people’s limited attachment to the paid workforce or cashing out any super balance they may have had. In the working age (15-64) group, one in five men, and one in four women have a zero superannuation balance. More importantly, in the 55-64 age group approaching retirement, some 17% of men and 27% of women have no super.
Men are not only more likely to have superannuation; they also often have higher superannuation balances than women. Mean and median balances for those who had superannuation in 2013-14 are shown by age and gender in the table below. Women now hold around 36% of the total account balances. Although nowhere near parity, this does represent a significant improvement over the last 20 years (in 1994, the female share was only 23%).
The average super balance for males aged 15 years and over in 2013-14 was $134,800. This is 62% higher than that for females ($83,110). Of concern is that both the mean and median show that the gender gap in super is most marked for those approaching retirement. Men aged 55-64 years have, on average, super balances 79% higher than females and a median balance that is 88% higher.
Super is usually seen as shared savings among couples. However, when partners permanently separate, super balances are split. The division of super assets is determined as part of the overall financial settlement. Super balances held by men and women in couple relationships and for those who divorced were explored in the AMP-NATSEM Income and Wealth Report Issue 39 “Divorce: For Richer, For Poorer”.
The figure below shows the average super balances in 2014 for parents aged 25-64 years, noting that for men and women in couple relationships, super held individually was pooled and evenly shared between partners. As can be seen, there are significant differences in the superannuation balances of married and divorced parents, and the effects of divorce on superannuation are very different for men and women.
Divorce affects different age groups differently. If people’s education levels, employment status and income are controlled for, a divorced mother aged under 45 years has about 42% less superannuation than that allocated to a married mother, and divorced mothers aged 45-64 years have about half the superannuation of married mothers with similar socio-economic characteristics.
Divorce does not seem to exert an independent effect on the superannuation of males aged under 45 years when controlling for socio-economic status. However, a divorced father aged 45-64 years has about 60% less superannuation than a married father of similar age, income, employment status and educational attainment. Within the same age and socio-economic group, a divorced mother has about 37% less superannuation than a divorced father.
Super balances will continue to grow in the future with the maturing of the compulsory super guarantee scheme, and increased rates of female participation in the workforce. However, the data suggests that younger females whose relationships have broken down view superannuation very differently to older females. This is not surprising given that younger people have much lower super balances that have to be factored into financial settlement agreements.
The present value of these assets is also low as they cannot be realised for many decades into the future. However, a favourable division of superannuation assets on separation and divorce is likely to be prioritised by older women as they attempt to secure an adequate income stream for their fast approaching retirement.