Eight ways for women to boost their super

Should employees receive super contributions when on parental leave? This is one strategy up for discussion to solve the much broader issue of superannuation gender disparity that impacts women.

Not only do we have a gender gap in regard to pay, this gap is glaring when it comes to retirement savings.

According to the Australian Human Rights Commission, half of women aged 45-59 have $8000 or less in their super funds, compared to an average of $31,000 for men of this age.

They say more women are living impoverished during their final years, as they generally have a longer life expectancy than men. On average, all Australian women have about one quarter less in their super balance than their male counterparts.

This pre-Covid figure may actually be worse now, with advocate group Women In Super warning that they expect to see the gap widen given the early release on the super balances of almost 500,000 Australians during the pandemic.

There are many reasons for this gender disparity. More women are in part-time work than men. Women also tend to take time away from the workforce to have children.

On top of this, the gender pay gap means less super is paid to women, given super is a percentage of salary/wage. Currently, the employer contribution is 11 per cent and this will increase to 12 per cent by 2025.

How women can stay ahead of the curve

The question I raised at the start comes from an Australian Greens proposal: the recent government announcement about applying higher tax on super balances over $3 million prompted the Greens to say they would only support this legislation if super contributions were paid when employees are on parental leave.

While this is only at proposal stage, it would be a welcome change and ease the super/retirement gender gap for many women.

Aside from waiting for political change, there are strategies all women (whether single, or as part of a couple) should consider, to ensure you don’t fall behind.

Superannuation laws are complex and there are severe penalties if you get it wrong. It’s best to seek professional advice if you decide to implement complex strategies.

1. Build savings early: whether these savings are outside or inside of super, establish a savings plan so you are getting the benefits of compounding interest and ensuring you have a nest egg for your retirement.

Having a savings plan outside of super also ensures you have flexibility to access the funds in case you need capital for other objectives. As you near retirement, then you can start making personal contributions into super. The maximum personal contributions (non-concessional) currently stand at $110,000 per year.

2. Make personal contributions: If you are taking time off work, if at all possible try to continue to make personal contributions to super, no matter how small. It can provide a significant boost by the time you retire.

3. Assess your investments: Ensure the underlying investments in your super fund are invested effectively, according to your risk appetite. It’s important to talk to a qualified and trusted financial advisor if you are unsure about how to work out risk appetite.

4. Make the most of spouse contributions: if you are a couple, you can have your spouse contribute to your superannuation fund if your income is below $40,000 per annum. Your partner can contribute up to $3,000 per year to your super fund and be eligible for a tax offset of up to $540 per year.

5. Consider catch up contributions: if you have not used up your personal contribution limit of $27,500 per annum, you can use the previous rolling five-year limit and make additional contributions to super.

6. Superannuation split: another way to boost your super is to have your partner split the concessional contributions made into their account, and transfer some to your account.

7. Super equalisation: as the maximum amount in super that can be converted to a pension is currently $1.9 million (per person), there may be benefits to equalise your superannuation fund balances with your spouse so you both gain the benefits of a tax-free pension. This strategy also enables you both to share and enjoy your retirement years and potentially provides effective tax planning and estate planning.

8. Downsizer contribution: if you are aged 55 or older and have sold your home that you have owned for more than 10 years, then you can also make a contribution to super of up to $300,000 per person.

Then of course, there are the super tips for all genders, from making voluntary contributions early in your working life, to making sure you consolidate small accounts into one super account so you’re not paying too many fees. This allows the miracle of compound interest to go to work for you.

Grace Bacon is the Director of RSM Financial Services Australia (AFSL 238 282), advising clients on wealth management, retirement planning and succession planning.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, please contact Grace Bacon or your local financial adviser.

This article first appeared in The Sydney Morning Herald and was syndicated in The Age, Brisbane Times and WA today.

Note: past performance is not an indicator of future results.

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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