In a post-COVID world, superannuation accounts will take a hit. Especially women’s.
The gender divide when it comes to superannuation is not a new issue for women, but it’s also one no one is really talking about.
There are several factors at play here. First it starts with the pay gap. Workplace Gender Equality Agency estimates women on average take home $242.90 less per week than their male counterparts. Compound this over a working lifespan, and you’re already looking at a mighty shortfall, simply for being female.
Next, there’s the financial setback many women experience taking time out of the workplace to raise a family. Between the age of 29 to 34, the average woman is expected to experience a shortfall of almost $100,000 in retirement savings. And even if women return to work post children, they are often at a significant disadvantage in the roles they can choose.
The result? Australian women retire with a staggering 47% less super than men.
Take a moment to let that sink in.
What’s COVID got to do with it?
Without doubt, COVID-19 has had devastating impacts across the globe, with Governments scrambling to press pause on the economy in an effort to safeguard the population. In a matter of months, Australia experienced more unemployment than in living memory, with the ABS reporting nearly 835,000 jobs lost nationwide.
So when Scott Morrison announced Australians who had been adversely affected financially by COVID-19 could have early access to super, many jumped at the opportunity. In fact, APRA has reported that $25.3 billion has already been paid out through the early release scheme, just a smidge away from the $27 billion limit set by the government.
There is also growing evidence that suggests women have been – and will continue to be – the hardest hit in the recession, with female employment dropping by 8.1%, compared to male employment at 6.2%.
Many women, having experienced the full blow of financial hardship in a depressed economy, have been left with no choice but to access the early withdrawal scheme. While the initiative has been intended to provide additional support during an impossible time, it will result in longer term impacts to Australian retirement funds, as well as a widening divide in an already significant gender super gap.
Sangeeta Venkatesan, Executive Chairman of WORK180 Partner FairVine Super explains that while there are reasons women may need immediate access to super, early withdrawal should be a last resort. She said:
“There will absolutely be circumstances where individuals might have no choice but to access their super early. But what we’re finding is that many people aren’t aware of the longer term impact this will have on their future balance.”
So if you’re weighing up pros and cons of early withdrawal, here’s what you should first consider:
1. Find out what financial assistance is available to you
Before jumping in to withdraw, make sure you exhaust all other avenues first. The Australian Government announced a total stimulus package of $320 billion, made available through schemes like JobKeeper. Check out the Centrelink website to see what’s available for you.
2. You don’t know what you don’t know
Understand the pros and cons of early withdrawal, and what long term effects this might have on your end balance. The compounding interest you lose between now and when you want to access your super in retirement will have very real effects on your final balance. Tools like MoneySmart help you estimate what impact withdrawing today will have on your retirement. Many Australians also have life insurance through their super accounts, and risk losing protection cover. Be sure to ask your provider what the threshold is, and whether you’ll be impacted.
3. Equity markets suffer during COVID-19
Investment markets are also feeling the effects of COVID-19. Experts have indicated that early access to super has meant funds may need to sell assets at a lower price. Put in simplest terms, what this means, is you’ll get less money if you withdraw during a recession.
4. Ask your super provider what they can do for you
Many of us would admit we’ve spent more time deciding what to have for lunch today, than considering what super benefits our provider might be able to offer. It’s time to ask. By way of example, FairVine Super is offering refunds on administration fees through their FairGo scheme for any new or existing members who have been impacted financially by COVID-19. Sangeeta says:
“FairGo was set up for anyone who had their pay or hours reduced, where we waive 50% of their fees until December 20. This initiative was established purely to encourage our members to not withdraw their money unless they really needed to.”
5. Have a plan
If you have decided to access your super, make a note to revisit your retirement plan when you are in a more financially secure position. No matter what stage of your career you are in, there will be ways to recoup some of your withdrawal, whether it be through increasing your pre-tax contributions or switching to a more competitive provider.
From our perspective, employers play a key part in helping close the super gap. That’s why we ask each WORK180 Endorsed Employer for Women whether they will pay super on paid and unpaid parental leave. You can find this information and many more benefits and policies here.