COVID-19 has not done women any favours when it comes to the superannuation gender gap. While its full impact on superannuation will not be known for some years, available data indicates that women were more likely to have lost their jobs or had reductions to their paid working hours1 because of:
These factors have also contributed to a disproportionate number of young women giving up study1, which is likely to impact future earnings over their lifetimes. The result is less money flowing into women’s superannuation accounts.
Pandemic stimulus packages, in the main, did not target the most affected groups. One that did acknowledge the impact on women was the Victorian Government’s “Free Kinder” initiative, which sought to remove financial barriers associated with women with young children from returning to work2. Federal government recovery measures were primarily delivered through tax cuts and infrastructure spending, delivering relief to higher earners (disproportionately males) and the male-dominated construction and energy sectors1.
Women are more likely to rely on the age pension as their primary source of income in retirement, and elderly women experience higher rates of poverty than their male counterparts3. Irrespective of issues around gender equality, lowering dependence on the age pension and reducing poverty levels should provide a call to action.
Various organisations have floated suggestions to help women close the superannuation gender gap, particularly as it relates to the contributions lost as a result of parental leave. These vary from something as simple as the payment of superannuation on top of the government’s current paid scheme, to more complex approaches involving contribution tax credits applied in the years following return from parental leave4. No action was taken on this in the 2022 Budget, although it did include changes to the scheme which sought to increase choice and flexibility for families5 by enabling them to choose how to split leave payments between parents more easily.
In the decade leading up to age 65, the gap in median superannuation account balances is 35%6. That means a woman approaching retirement has 35% less in superannuation than a man of the same age. But the gap exists at all ages, peaking at ages 45 to 54 years.
This is just one illustration; 23% of females have no superannuation at all at retirement, compared to 13% of males.3
While the gender gap in superannuation has narrowed, reducing by approximately 20% over the 14 years to 20186, it is unlikely to disappear without addressing the underlying causes. The gender pay gap, and women continuing to take the greatest share of unpaid leave and part time work relating to unpaid caring responsibilities7, ensures that the issues in superannuation endure.
If a gender pay gap exists in your organisation, that will have a direct impact on superannuation contributions for your employees. Conducting a pay equity analysis can help you determine what action, if any, you could take. It may prove to be a key differentiator for your business when attracting and retaining talent.
Employers can also assist by offering paid parental leave including superannuation to new parents, supporting flexible working hours where possible to greater enable parents and carers of young children to re-enter the workplace, and supporting employees to understand and improve financial wellness, facilitating better financial management and retirement planning.
As employee benefits consultants, WTW can assist in conducting a pay equity analysis, reviewing corporate compensation packages, including the structure of parental leave entitlements and default superannuation arrangements, as well as Financial Wellbeing programs and Diversity and Inclusion training.
This is the first in a series of articles from WTW, taking a deeper dive into aspects relating to the superannuation gender gap.
1 Women’s work: The impact of the COVID crisis on Australian women, The Grattan Institute March 2021
2 Premier of Victoria media release: Free Kinder for Families through Coronavirus 9 August 2020
3 Workplace Gender Equality Agency: Women’s economic security in retirement February 2020
4 KPMG: The Gender Superannuation Gap August 2021
5 Budget 2022-23: Women’s Budget Statement
6 Australian Bureau of Statistics: Household Income and Wealth, Australia 2017-18
7 Australian Bureau of Statistics: Gender Indicators 2020
