Most people will have heard of the term ‘gender pay gap’ and be familiar with what that means but fewer will realise that this is a major cause of what’s known as the ‘gender super gap’.
The gender super gap directly affects retirement income and while that gap between men and women is narrowing, policymakers have identified the need to make continued improvements.
The Centre of Excellence in Population Ageing Research (CEPAR) published a research brief in November 2018 titled ‘Retirement Income in Australia’ as an in-depth study into trends in retirement income for Australians. It looks at the current state of, and projected future of, retirement income and the system that shapes it.
The CEPAR report also examined research which showed that even though improvements have been made in the gender super gap, single women will be less financially secure than other groups in retirement.
Why retirement income is different between men and women
Retirement incomes differ considerably by gender, which largely stems from superannuation, but poverty rates between men and women are similar.
Since 1990, the gender ratio of people receiving the Age Pension has changed significantly when 70% were women. These days, 55% are women.
This decreasing trend is due to the narrowing of various gender gaps. Men’s life expectancies are catching up to women and women’s retirement resources are catching up to those of men and eligibility policies are applied more uniformly.
Balances are growing, but women still face a super gender gap
According to the Association of Super Funds Australia (ASFA) super balances have grown to an average of $214,000 for those aged between 60 and 64 in 2016, with a median of $68,000.
However, women’s superannuation balances are 64% lower than men’s, although the gap has almost halved over the past decade.
CEPAR says there is concern over lower balances of single women, but the system compensates this via the Age Pension which, on average, pays women $2,000 more per year. It says the solution is to close the gap in working life, but parental leave contributions are poorly targeted.
Why is there still a gender gap in retirement income?
On the whole, as at 2017 women earned around 15% less than men, which means super contributions are lower. Gender gaps in retirement incomes can also be driven by interruptions to working life including care responsibilities where time is taken out from work for childbearing and childrearing, or to look after partners or parents.
CEPAR also reasons that inequality can spread beyond just contributions and balances. It cites research which shows women also exhibit lower financial engagement and literacy and report greater stress regarding financial decisions.
Women also pay proportionally larger insurance premiums and they also live about four years longer than men, and therefore must do more with less.
Gender gaps may be acceptable in a society where everyone forms part of a couple, where working and saving decisions are joint and retirement income is pooled. But 17% of Australians are entering their 60s living alone, which is up from 14% in the 1980s.
And single people tend to have lower balances than members of a couple of either gender.
Mean super balance by age and marital status, 2016
This is a problem given the increasing divorce rates and declining marriage rates.
As far as the retirement income system is concerned, there are already various measures in place to ensure that those who have poor outcomes in working life are partly compensated in retirement.
This forms the basis of Australia’s means tested Age Pension. As we mentioned earlier, the average woman aged 65 and above received about $2,000 more in government pensions than the average man in the same age bracket.
CEPAR concludes that the greatest impact on narrowing the gender gap on retirement income will be achieved by tackling gender differences in the labour market.
The changes seen in recent decades are already filtering through to a narrowing in the gender gap in super.