Cost of career breaks
More effort is being made to help women build up their retirement savings after a career break
Women planning a family can avoid building up a superannuation “baby debt” by taking simple measures to close the gap in their retirement savings. However, many of them miss out because they are unaware of what steps they can take to do so.
The reasons women accumulate less super than men are many and varied: they earn 18% less than men for the same job; they take career breaks to have children; they work part time to accommodate family commitments; and they miss out on promotions and salary increases.
Research conducted by REST, one of Australia’s biggest super funds, found that taking career breaks cost women $159,590 in retirement savings compared with those who took none. Fewer than one in five women made super contributions during their break.
It also showed women earned 29% less than their male counterparts on returning to work (women worked fewer hours after their break). The research’s projections showed women retired with $283,141 less than their male counterparts by the age of 67.
Mary Atley, general manager, brand, marketing and communications, at REST, says that while there are a range of structural issues that contribute to the gender super imbalance, it can be lessened with careful consideration and action.
“The research highlights a range of contributing factors to the gender superannuation gap,” she says. “We’re here to help women prepare for any career breaks – whether planned or unplanned – and offer REST members straightforward advice about where to invest their super, how to maximise their super investment, or assess their insurance needs at no extra charge.”
REST introduced “mobile first” access to personalised financial advice for members with the launch of REST Advice Online a few years ago. It offers live webchats and over-the-phone support from qualified advice specialists and allows members to explore their options for simple issues and receive an emailed statement of advice.
Its education hub, available on its website, provides personalised, clear and straightforward information with simple tips and short videos. The super fund also conducts educational seminars across Australia.
Make up the shortfall
“If women have more than one child they can be off work for quite an extended period,” says Deborah Potts, head of advice and education at REST. “The main message we would like to say to women thinking about a career break is ask your fund for help and get advice.
“What we find with women in their 20s and 30s – we call them serendipitous learners – is that they don’t seek out financial advice when they are thinking about taking a career break but if it falls into their lap they are such quick learners. They grab it with both hands.”
Understanding the power of compound interest, and how contributing even small amounts to super, such as $20 extra a week, can have a big impact over 40 years.
Start as early as possible, says Potts. “Even if you are not thinking of taking a career break in the next few years, if you’re in the position to do something today, to contribute more, it will make a big difference.
“Take advantage of everything your super fund has to offer. Many funds offer education and advice on the phone and online. Make sure your investment option is suitable and that your insurance is appropriate for your family’s needs.
“Talk to your spouse about what they can do to top up your super through a spouse contribution,” says Potts. She advises women to check whether they are eligible for the federal government’s co-contribution, which could add up to $500 a year to their super.
Women should also check their employer’s benefits and parental leave schemes and look at what the employer is willing to contribute. “They may at least be willing
to contribute to your super,” says Potts. “We have some employers that REST works with that pay additional super for their women staff and continue to top up their super during their maternity leave. Employers can make a huge difference.”
Extra support is needed
The respected actuarial firm Rice Warner has examined in detail the financial impact on women as they bear and raise the next generation. Looking at potential solutions, it argues there's a case to be made for giving female employees extra support.
“Employers are trying to provide a reasonable benefit on retirement for their staff,” it says. “If a proportion of these staff will struggle as a result of genetics, then surely there is an argument to support them more in the same way that insurance cover should be set to cover needs.”
Leading by example, Rice Warner has implemented a special package. It pays female staff 2% more super (11.5%) than male staff. This comes on top of 18 weeks' paid parental leave and super payable on parental leave for up to one year.
The super researcher would also like to see retirement tools on fund websites that more accurately reflect women's true circumstances. “Instead we assume everyone will work every year full time. This makes the process simple but it's inaccurate. Earning the super guarantee on a full-time salary every year of a career simply does not fit the build for all.”
For more details visit ricewarner.com/the-impact-ofchildren-on-superannuation.
Female staff are paid 11.5% super, which is 2% more than what the men get