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Women and superannuation Women and superannuation 2008 Annual Premier‟s Women‟s Summit women & money Women have less superannuation The figures for superannuation saving show that generally, women accumulate significantly less than men. The Association of Superannuation Funds of Australia Limited found that: • Average balances achieved in 2006 were $35,520 for women and $69,050 for men. • Average retirement payouts in 2006 were $63,000 for women and $136,000 for men. • The amount of superannuation needed to support a comfortable lifestyle in retirement is around $500,000. $200,000 is sufficient to finance at least a modest lifestyle in retirement. • Women hold about 34 per cent of superannuation assets, compared to 66 per cent for men. However, the share held by women is up markedly from the 30 per cent held in 2004. • The projections for coming decades show that women‟s retirement income will remain less than men. For example, Investment and Financial Services Association‟s projections for members (in 2007 dollars) estimate that the average retirement balance for its women members in 2022 will be $149,303, in contrast with $216,207 for men. Further, as women, on average, live longer than men and contribute less superannuation over a lifetime, older women are more likely to rely on a government pension. In 2003 older women comprised 60.8 per cent of age pension recipients and most were dependent upon government pensions for most of their income. Around 55 per cent of women in their sixties have no superannuation. WHY? Lower earnings Women, on average, earn less than men, which limits their capacity to put money toward superannuation. • In 2006 women had a median income of between $250 and $399 a week, while the median income of men was higher, at $600–$799. • Women have lower participation rates, are overrepresented in part-time work and in low-paid sectors, and tend to have extended periods of time out of the workforce due to maternity leave and caring duties. • In 2005, 68 per cent of Australian women aged 15–64 years were in the labour force, in comparison to 83 per cent of Australian men in the same age range. Part-time work Over the last four decades, women‟s participation in paid work has increased. In 1979, 36 per cent of women were employed, compared to 45 per cent in 2004.6 The bulk of this growth can be attributed to women‟s increased employment in part-time work. • Women make up approximately 70 per cent of the part-time labour force. Of the full-time labour force, women make up around 35 per cent.7 Women, on average, earn less than men, which limits their capacity to put money toward superannuation. Lower-paid professions Women experience continuing segregation in “feminised” occupations such as childcare and industries such as retail, with lower rates of remuneration, than in industries where men predominate. Maternity leave and its impacts on superannuation A high proportion of working women will at some point in their lives take time off to care for their children. • In 2005, 74 per cent of working mothers took leave or time away from their job for the birth of their child. • A 30-year-old female with an annual salary of $50,000 taking a career break of six years could miss out on as much as $77,000 in retirement savings by age 65.10 Lower levels of understanding about superannuation. While both men and women have low levels of understanding about superannuation, fewer women have any extensive knowledge about superannuation and the importance of saving for retirement. Among women, there is • A general lack of awareness around co-contribution and taxation relating to superannuation. • A general lack of interest in effective consolidation of superannuation (many women have two or more super accounts and many have never made a voluntary contribution).11 Further, 28 per cent of female participants in a Citibank survey stated that they had no idea how much they would need to fund a comfortable retirement.12 Conclusions Due to interrupted work life, women need to make contributions to their super at more than twice the level of men in order to achieve the same level of retirement comfort.13 And unsurprisingly, research by the Financial Literacy Foundation found that fewer women than men are confident that employer-funded superannuation will be sufficient to cover their retirement needs (12.3 per cent as opposed to 16.1 per cent).14 Women are also more worried than men about having to rely on their partner for financial support The current legislation relating to superannuation includes a number of ways that women (and men) can voluntarily boost their superannuation. These include: • superannuation contributions splitting; • the superannuation spouse tax offset; and • the superannuation co-contribution. In particular the Australian Government‟s superannuation co-contribution has assisted many women to boost their superannuation, with more women than men taking advantage of the scheme. There are a number of resources tailored for women which provide information about superannuation. They include: • Women and superannuation - taking control of your future resource from the Australian Taxation Office, which can be downloaded from www.ato.gov.au • Australian Government‟s Financial Literacy Foundation‟s information sheet, Get to know your super15 tailored for women, which can be downloaded from www.understandingmoney.gov.au 1 The Association of Superannuation Funds of Australia 2008 <http://www.superannuation.asn.au/mr080211/default.aspx> 2 IFSA Fact Sheet „Why starting early makes Super sense‟, 3 April 2008 3 Olsberg, Diana 2005 „Women, Superannuation and Retirement: Grim Prospects Despite Policy Changes‟, Just Policy, Issue 35, pp. 31-38. 4 Clare, Ross 2008 „Retirement Savings Update‟, Association of Superannuation Funds of Australia 5 ABS Census, Population and Housing 2006 6 ABS Australian Social Trends, 2006, Trends in Women‟s Employment 7 ABS, Labour Force Australia, June 2008 8 Advancing Pay Equity – Their future Depends on it, report by The Victorian Pay Equity Working Party to the Minister for Industrial Relations, February 2005 <http://www.business.vic.gov.au/busvicwr/_assets/main/lib60047/85_pay-equity- final-4-3-2005.pdf> 9 ABS Census, Pregnancy and Employment Transitions, Australia, November 2005 10 Australian Institute if Superannuation Trustees Media Release, „Seven Steps for a Super New Year‟, 19 December 2007 11 Security4Women, Women, Saving and Superannuation. S4W Survey findings and summary, July 2005 12 Citibank Media Release, „Time for women to act says Citibank‟, 13 November 2007 13 Australian Institute of Superannuation Trustees Media Release, „Seven Steps for a Super New Year‟, 19 December 2007 14 Financial Literacy: Australians Understanding Money, 2007 15 http://www.understandingmoney.gov.au/content/consumer/women/ women & money month$ Household budgetingand expenditure Women‟s financial identity has historically been tied to the home and they continue to spend their money on their home and family. Women are confident in managing everyday expenses like budgeting, saving, dealing with credit and managing debt.16 A Wizard Home Loans study found that women are largely responsible for financial decision- making in the home, with 94 per cent of women managing and making decisions regarding household budgeting and expenditure.17 The 2006 HILDA18 survey found that: • 34.2 per cent of the women surveyed always make the household decisions regarding day to day spending and paying bills, compared with 21.8 per cent of men. • While the largest proportion of male and female respondents (around half) said that they shared the responsibility for making decisions regarding large household purchases, the next highest proportion (20.4 per cent) of women said they were always the main decision- maker, as opposed to 19.5 per cent of men. These figures indicate that women have a greater degree of financial control over household budgeting, and are more confident managing money in an immediate context. Women and money management Dealing with debt Women have lower average debt levels than men, apply for less credit, are more likely to repay their bills and are less inclined to make credit enquiries. Young women are also less likely to default than young men, making up 21.3 per cent of total defaults compared with 23.5 per cent of young men.19 • Generation Y women are more likely to have credit card debt than any other 2008 Annual Premier‟s Women‟s Summit women & money form of debt.20 • Almost a quarter of Generation Y households have a HECS debt – not surprisingly the largest for any of the generations.21 • Women are less likely than men to feel comfortable with their level of debt.22 Transmitted debt Research suggests that women are particularly vulnerable to “transmitted debt.” In the 1990s banks widely engaged in the practice of encouraging women to act as guarantors for the men in their family, which meant that in the event of divorce, death or estrangement, women could inherit that debt.23 Women are much more confident than men in managing everyday expenses like budgeting, saving, dealing with credit and managing debt. Divorce and separation causes a drop in income Women still make up the majority of home-based parents and as such are more dependent on their partner‟s income. This can mean that if a relationship dissolves, women are often left with fewer financial resources, limited earning capacity, and with diminished career prospects, especially if they are trying to re-enter the workforce after a long period. A 2005 AMP.NATSEM report on the economic effects of divorce found that while women tend to be asset rich immediately after divorce, they are more vulnerable than men to loss of disposable income. This is because the average man tends to live without children following separation.24 • Women who separate from a relationship experience an average drop in household income of 42 per cent, whereas men experience a drop of 8.2 per cent.25 Single mothers are moredisadvantaged Single women, particularly sole parents, are especially financially vulnerable. Many are dependent upon government pensions for their main source of income. • In 2003-04, government pensions and allowances were the principal source of income for 61 per cent of one-parent families.26 • In 2006, 87 per cent of one-parent families with children under 15 years were headed by mothers.27 • Single parents and single women occupied the poorest quartile of households by wealth holdings.28 • Single mothers are least likely to hold investments.29 WIRE – Women‟s Information has a range of information sheets on women and money, including, Property and Separation and Women and Debt, which can be download from WIRE‟s website www.wire.org.au. The Australian Government‟s Financial Literacy Foundation has recently developed fact sheets tailored for women, which can be downloaded from the Foundation‟s website www.understandingmoney.gov.au. The fact sheets cover a range of topics including: • Money and the single woman • Starting out • Managing money in your relationship. 16 Fear, Josh 2008 Choice Overload, the Australia Institute; Financial Literacy Foundation, Women Understanding Money, 2008; Singh, Supriyah and Anuja Cabraal, 2006 Women, Money and the Bank, paper presented to the Financial Literacy, Banking and Identity Conference, RMIT, University of Melbourne 17 Wizard Home Loans, Her Home Ownership: emerging trends in women‟s home ownership, March 2006 18 Household Income and Labour Dynamics in Australia Survey 2006 19 Dun and Bradstreet, „Australia‟s Youth Facing Debt Stress‟, 15 May 2008; Veda Advantage, „Gender Gap in Credit Puts Women on Top‟, 7 August 2007 20 AMP.NATSEM, „Generation whY?‟ Income and Wealth Report, issue 17, July 2007 21 Ibid. 22 Ibid. 23 Singh, Supriyah and Anuja Cabraal, 2006 Women, Money and the Bank, paper presented to the Financial Literacy, Banking and Identity Conference, RMIT, University of Melbourne 24 Connections Online, „Two Incomes to One: Taking control after divorce‟, August/September 2005 25 Weston, Ruth and Bruce Smyth 2000 Family Matters, no. 55, Autumn, Australian Institute of Family Studies 26 ABS, Australian Social Trends 2007 27 Ibid. 28 AMP.NATSEM, „Baby Boomers Doing it for Themselves‟, Income and Wealth Report, issue 16, March 2007 29 ASIC Australian Investors: at a glance, April 2008 women & money month$ Investing In comparison to men, women on average, lack investment knowledge. According to BT Investment research, women are significantly less interested than men in learning more about investments and demonstrate a lack of engagement with financial issues.30 However, the Financial Literacy Foundation‟s study found that 68 per cent of women surveyed were interested in learning more about investing money (still a lower figure in comparison to men, at 71 per cent).31 • A Citibank survey revealed that 20 per cent of women said they would know exactly what to do if they were given six months‟ worth of salary compared with 32 per cent of men.32 Men are more likely to have investments like shares or bonds. • In 1997, just 18 per cent of women owned shares directly. However, in 2007, 37 per cent of women owned shares directly, only marginally behind men at 40 per cent. This marks a significant long term increase in share market investment among women.33 Women investors are more likely to have low- value portfolios, but be better investors: • Women are more likely to have investment portfolios valued below $20,000 and much less likely to have portfolios over $500,000 or more. • Women investors tend to have managed investments, rather than managing them themselves, and diversified portfolios.34 2008 Annual Premier‟s Women‟s Summit women & money Women are more likely to invest in property and are, importantly, more likely to own their own home. Wealth and investing • However, in comparison to men, women are more likely to make fewer investment mistakes, such as allocating too much to a single investment or acting on unsubstantiated “hot tips”.35 Women prefer to invest in property Women are more likely to invest in property and are more likely to own their own home.36 • Wizard Home Loans‟ Her Home Ownership: Emerging Trends in Women‟s Home Ownership found that 70 per cent of women preferred property investments to any other form, mainly due to a greater understanding of the market and a perception of stability and relative safety.37 • In comparison to NZ, UK and Canada, Australian women are far more likely to use property investment as a means of creating financial independence, and represented the highest proportion of women who purchased a property by themselves.38 Younger women are saving more, earlier Younger women are showing more of an interest in financial issues and demonstrate an awareness of the need to plan for retirement and to start saving early. • Comparatively, over time, there has been a rise in female earnings. • Women are spending less time out of the workforce after having a child, and more women are returning to full- time, rather than part-time work.39 • The proportion of women employed as professionals has risen dramatically. 27 per cent of employed Generation Y women are professionals or associate professionals, compared with only 20 per cent of employed Generation Y men.40 • Generation Y women are significantly more likely than men to hold a bachelor‟s degree or a diploma.41 These trends indicate that there is a growing number of women who have the capacity to start saving more and earlier. Indigenous women have alower earning capacity Generally, in Australia Indigenous men and women have relatively lower levels of employment and education which limits their ability to secure financial independence. • Unemployment for Indigenous Australians is more than three times the non-Indigenous rate. • In 2006 the median gross individual income for Indigenous people was 59 per cent of the median income of non-Indigenous people. • Employed Indigenous women report a lower median income than Indigenous men (84 per cent).42 30 BT Financial Group, „Women and Money‟, BT Quarterly, Vol. 1, October 2005 31 Financial Literacy Foundation, Women Understanding Money, 2008 32 Citibank, „Results and Insights from the Citi Fin-Q Survey‟, March 2008 33 Field, Nicola, „Girl Power: are women better investors?‟ Money Magazine, November 2007 34 WIRE, Women‟s Financial Literacy Research Report, August 2007 35 Field, Nicola, „Girl Power: are women better investors?‟ Money Magazine, November 2007 36 Citibank, „Results and Insights from the Citi Fin-Q Survey‟, March 2008; Financial Literacy Foundation, Women Understanding Money, 2008 37 Wizard Home Loans, Her Home Ownership: emerging trends in women‟s home ownership, March 2006 38 Property Investors Association of Australia, „Australian women lead the global property charge‟, March 30, 2007 39 IFSA Fact Sheet „Why starting early makes Super sense‟, 3 April 2008 40 AMP.NATSEM, „Generation whY?‟ Income and Wealth Report, issue 17, July 2007 41 bid. 42 ABS, Population Characteristics, Aboriginal and Torres Strait Islander Australians, 2006 women & money month$ Women‟s confidence in financial decision making 2008 Annual Premier‟s Women‟s Summit women & money Women‟s confidence in financial decision making 2008 Annual Premier‟s Women‟s Summit women & money Attitudes to money Women are often required to take control over financial matters d uring times of profound change in their lives, like death of a partner or divorce. At the time when they need to be at their most astute and financially and mentally able, they are dealing with extremely stressful issues, often involving the welfare of family or children.43 Confidence about financial decision making Research by the Financial Literacy Foundation found relatively lower confidence levels among women regarding long term financial decision- making. A significant number of women also felt that they were „hopeless‟ with money and „uninformed‟. • 52 per cent of women say that dealing with money is stressful and overwhelming. • 42 per cent of women say that thinking about their long-term financial future makes them uncomfortable. • 23 per cent of women believe that nothing they do will make a big difference to their financial situation.44 Many women do not access basic information related to their own financial situation and are unable to say how much superannuation they contribute. Women‟s lack of confidence reflects the gaps in their financial knowledge.45 Gaining financial advice Women prefer to rely on assistance from people they know and trust in looking for financial help. • Women are three times more likely than men to consult their partner before making superannuation decisions.46 • Women feel more comfortable doing business with a „female-friendly‟ fund. • Women favour people as information sources, rather than media or advertising.47 • 60 per cent of women surveyed by the Financial Literacy Foundation say they have used a bank for financial advice, compared with 53 per cent of men.48 • 82 per cent of women surveyed by WIRE - Women‟s Information do not trust financial planners because they believe they are biased and sell products for which they receive commissions.49 Women prefer to rely on assistance from people they know and trust in looking for financial help. The problem of too much choice Today, for both men and women, the array of choices available in financial decision- making can be overwhelming, especially with the recent introduction of Super Choice.50 For people who feel uninformed or lack understanding, this often means that they end up making no choice at all.51 • According to a HESTA Super Fund survey conducted before the Super Choice legislation came into effect, 64 per cent of women felt that they did not know enough about superannuation to choose a fund. • Most women were unaware of the choice of fund legislation, lacked confidence about making the right choice of fund and were more worried than men about their superannuation. • While 64 per cent of women felt they did not know enough about superannuation to choose a fund, the figure was as high as 80 per cent for women aged 15-29 years. Marginalised women have greater difficulty accessing services and information • Marginalised women are mistrustful of banks to give reliable financial advice due to the perception that they are self- interested.52 • Indigenous women have more difficulty accessing services and information due to their higher concentration in geographically isolated areas, and lower employment rates compared to non-Indigenous women.53 • For culturally and linguistically diverse women, cultural attitudes to money and the lack of financial information available in their first language are significant barriers to accessing financial institutions and government support agencies.54 The Financial Literacy Foundation fact sheets for women, which can be downloaded from its website www.understandingmoney.gov.au, aim to assist women improve their financial knowledge and confidence in financial decision making. Fact sheets include: • Your relationship with money • How to get good advice about money What does it all mean? Understanding the language of money 43 WIRE, Women‟s Financial Literacy Research Report, August 2007 44 Financial Literacy Foundation, Financial Literacy: Australians Understanding Money, 2007 45 BT Financial Group, „Women and Money‟, BT Quarterly, Vol. 1, October 2005 46 Thomson, Tax and Accounting Insight, Issue 94, 28 January 2005 47 WIRE, Women‟s Financial Literacy Research Report, August 2007; BT Financial Group, „Women and Money‟, BT Quarterly, Vol. 1, October 2005 48 Financial Literacy Foundation, Women Understanding Money, 2008 49 WIRE, Women‟s Financial Literacy Research Report, August 2007 50 www.superchoice.gov.au 51 Fear, Josh 2008 Choice Overload, the Australia Institute 52 Office for Women, 2007, „Financial Literacy Among Marginalised Women‟ 53 Ibid. 54 Ibid. women & money month$
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