Building a robust super fund is essential for securing a comfortable retirement. However, women often face challenges that impact their superannuation balances, particularly when taking time off work to raise children.

According to the ASFA, women typically retire with smaller super balances compared to men. The average superannuation balance for men aged 60 to 64 is $402,838, whereas for women, it's $318,203.

Considering this superannuation gap, women face an increased risk of experiencing retirement poverty due to various factors, including career interruptions for childcare responsibilities. In this article, we explore effective superannuation investment strategies tailored to women, empowering you to maximise your retirement pot and achieve financial security.

The superannuation gender gap 

When it comes to the amount we could be missing out on, women take an average career break of six years to have children. This is a whopping $59,499.80* in missed superannuation contributions, based on the average income. 

Six years seems like a long time, but this is in part since women are more likely to remain the primary caregivers when they return to work, often taking part-time or casual positions. While, according to ABS Labour Force, 47.7% of the workforce are women, only 27.6% of full-time employees are women. Consequently, women are also less likely to hold senior or managerial positions.

Issues women face in retirement planning

Women encounter several challenges that often leave them unprepared for retirement compared to men. Some of these include:

1. Gender pay gap: Women often earn less over their careers due to the gender pay gap, resulting in lower lifetime earnings and consequently lower retirement savings.

2. Career interruptions: Women are more likely to experience career interruptions or periods of part-time work due to caregiving responsibilities. These interruptions can impact their ability to contribute consistently to retirement savings.

3. Longer life expectancy: Women generally live longer than men, which means their retirement savings need to stretch over a longer period. This can increase the risk of outliving their savings. According to the ASFA, the current average life expectancy for a 65-year-old is 85 for men versus 88 for women.

4. Lower superannuation contributions: Women may receive lower employer contributions to superannuation due to working part-time or in lower-paying industries.

5. Divorce and separation: Divorce or separation can have significant financial implications for women, including dividing assets and potentially losing part of their retirement savings.

6. Lack of financial literacy: Some women may have lower levels of financial literacy or confidence in managing investments, which can affect their ability to make informed retirement planning decisions.

As a result of the above challenges, women often face disparities in superannuation savings:

• 23% of women aged 60-64 have no super compared to 13% of men.

• 55.2% of people receiving the age pension are women. 

• 34% of retired women relied on their partner’s income to meet their living costs at retirement compared to 7% for men.

Addressing these challenges requires tailored strategies and policies that promote gender equality in the workforce, support women's career advancement, and provide access to resources and education on financial planning and retirement savings.

Superannuation investment is an important strategy to help women address inequitable outcomes in retirement. And fortunately, there are some simple superannuation investment strategies you can employ to help maximise what you have. 

Superannuation investment strategies

• Co-contribution: Superannuation co-contributions help eligible people boost their retirement savings. If you earn less than $60,400 and make personal (after-tax) contributions into super, the government may also contribute up to a maximum amount of $500.

• Low-income super tax offset (LISTO): If you earn $37,000 or less a year, you may be eligible to receive a LISTO payment. This is usually paid directly into your super fund. The LISTO is a contribution by the Government (with a maximum payment of $500) which seeks to return a 15% tax paid on concessional (before tax) contributions.

You can receive both the co-contribution and the low-income super tax offset if you meet the criteria set out above.

1. Consolidate super funds

Moving all your super into one super account makes it easier to manage and helps to save on fees. But before you consolidate, do some research into each fund to see how they have performed and what services and features they offer.

However, remember that returns represent past performance only and are not indicative of future performance. Also check where your employer contributions are being paid and if there is any insurance attached to the fund. Remember to seek advice from a professional advisor before consolidating, there could be implications you may not be aware of.

2. Spouse contributions

Member contributions made by your spouse into your superannuation can help accumulate funds for retirement. This is a contribution made using after-tax dollars, where a tax deduction has not been claimed. Both you and your spouse must be Australian residents and living together when the contribution is made.

The benefit of this strategy is that the contributing spouse can claim an 18% tax offset through their tax return. For your spouse to be eligible for the maximum tax offset, which works out to be $540, they need to contribute a minimum of $3,000 and your income needs to be less under $37,000 for the full rebate and a partial rebate up to $40,000.

3. Contributions splitting

Contributions splitting can help single income couples share the accumulation of superannuation in a similar way to dual income couples.

It allows for a low income earning or non-working spouse to increase their superannuation balance by splitting super contributions. However, not all super contributions can be split and not all super funds will allow it.

You can apply to split super contributions either in the same financial year in which the contribution has been made or in the following financial year, however this will need to be checked with your fund.

4. Equalising superannuation accounts

For those who have reached their preservation conditions you could consider equalising or moving super balances between spouses. This can be achieved by withdrawing funds from one spouse’s super account and re-contributing to the other spouse’s account.

There can be multiple advantages for doing this:

• Utilising both spouse’s $1.9m pension cap so future earnings will be taxed at 0% in the retirement phase.

• Withdrawing funds and re-contributing them can change taxable components into tax-free components. This could potentially reduce potential estate taxes for your estate and children.

• You can redirect superannuation in a younger spouse’s superannuation account which may increase the Age Pension for the older spouse.

• Using Transition to Retirement Pension and unused concessional caps to make deductible contributions to super.

If you have some excess savings, you can make a personal contribution to super to claim a tax deduction. Depending on your salary any contributions made to super where you claim a tax deduction will only be taxed at 15%, which could be lower than your Marginal Tax Rate.

Tax-saving tactics for retirement: Sally's story

Sally is aged 60 and had $330,000 in her super on 30 June 2024. Sally earns $90,000 p.a. and has $70,000 in her carried forward unused concessional contributions caps.

• Sally commences a Transition to Retirement Pension with $300,000 of her superannuation balance and takes the maximum 10% or $30,000 as an annual pension payment.

• Sally then contributes this back to her super and claims a tax deduction on the full $30,000 contribution. Sally’s tax savings would be: $30,000 x (30% - 15%) = $4,500.

• Sally could then repeat the same strategy each year.

If Sally’s super balance is less than $500,000 and she has unused carried forward concessional caps available, her contribution could exceed the annual contribution cap of $30,000, which would provide even greater tax savings.

*Calculation based on the average female full-time salary (private) of $1,658.30 per week multiplied by 11.5% missed Superannuation Guarantee Charge (SGC) over the six years. $1,658.30 x 52 weeks x 11.5% SGC x 6 years = $59,499.80. Source: ABS, 2023.

Key takeaway

Superannuation investment is important. The more you have, the more comfortable your life can be in retirement. And the sooner you start looking at strategies to maximise it, the more opportunity you will have to see results. Small changes implemented now can make a significant difference in retirement.

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