It’s an unfortunate reality that if you’re a woman earning an income in Australia, you’re likely going to retire with less super than your male equivalent.
I get it, taking an active interest in your superannuation isn’t exactly the most fun thing you could do. It’s an attitude that prevails among most of us, even the experts.
Before she started as CEO of Zuper Superannuation, Jess Ellerm hadn’t paid any attention to her super, “Coming from a banking background I should have known a lot about where my super was, but I realised that I had no idea how much I had, where it was invested or how it was invested.”
“An overwhelming majority of us – 60 percent to be exact – are perfectly happy to let our employer default us into any super fund when we first start working. During this process we pay scant attention to fees, how the fund invests our money, or even actual performance,” says Jess.
Outside of a house, superannuation is your biggest asset. Your BIGGEST. You need to pay attention to it.
The superannuation industry does not favour women
On average, women earn 84 cents on the male dollar. This means that as a percentage, women’s superannuation contributions are 16 percent less than men’s.
For women that decide to have children, working life is often interrupted by maternity leave. While many women can access the Commonwealth Paid Parental Leave Scheme, the normal compulsory superannuation payment doesn’t apply.
Women also often work part-time to care for children and are often the people who care for elderly parents. What does this all add up to? You guessed it, less super.
Then there’s longevity. Women live on average 5 years longer than men. So while we earn less and take time out of paid work, we need more money to last us in our golden years, “The system is structurally designed for men, not for women. That’s something that we have to unpick and redesign,” says Jess.
Retiring with a lower superannuation balance will mean you’ll be reliant on the Government Age Pension (if it still exists!) when you retire. The age pension is not designed to offer you a comfortable retirement. This will greatly reduce your quality of life in your later years.
Why the apathy?
There’s a behavioural economics term that describes the apathy many of us feel about our super: delay discounting. It denotes that a delayed reward, such as money we can’t access until we’re 65, is of less value than an immediate reward, money we can spend now.
Younger people have even longer until retirement so there is a higher rate of perceived risk in locking away money not accessible until faaaaar into the future. So what happens? Young people often live for the moment instead, and worry about their super when (quite frankly) it’s too late.
“Generally speaking, we don’t like thinking about ageing or death – two emotions that crop up when we’re faced with decisions about our retirement. So, as a result, we avoid or defer, mostly content to let one of life’s biggest financial decisions wash over us,” says Jess.
The good news is you can do something about this now. However, it is up to you to do it.
Consolidate your super
If you have more than one super account, look at consolidating them into one low-fee, member-focused fund. Often this can be done by your new fund or you can do it easily online yourself via the MyGov website. Once you’re in one account you will not be paying multiple management fees.
Before you switch check the following:
- Are there any termination fees from your existing fund/s?
- Will you be able to get the same level of insurance?
- Can your employer contribute/salary sacrifice into your chosen fund?
Contribute extra (if you can)
Make your own contributions to your super while you’re working. Yes, you’ll take home less pay but there can be some sweet tax benefits for higher income earners that happen when you reduce your gross annual payment by contributing to super.
The Australian government has incentivised additional super contributions for low-income earners. This means that if your annual income is less than $51,021 per year and you contribute additional after-tax $$$ into your superannuation, the government will make a co-contribution payment.
Know where your money is going
Have a look at what you’re invested in. There are now a range of choices out there, including sustainable options.
Zuper and other superannuation funds offer ethical options including tobacco free, weapons free and coal free. Jess says that younger consumers aspire to having a positive impact on the world, “While our forebears are intent on exhausting every possible source of extractable fossil fuel, we’re far more likely to turn to renewable energies, or advocate for climate change policies.”
Zuper also plan on building investment options that are voted up by the crowd. Right now one option up for vote in the Zuper platform is Future Woman, a fund that would allow you to put your super to work in businesses that promote gender diversity and women in senior leadership.
“While white haired governments seem ready and willing to implement regressive gender, equality and religious policies, we’re willing to march against them,” says Jess.
Jess Ellerm is the CEO and Co-Founder of Zuper Superannuation. Zuper is a new superannuation fund aimed at millennials that asks: How can Australians connect their money with the world, so it better powers the future they actually want to live in?
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