November 23, 2017 Paula Benson

Solutions to the Gender Gap in Retirement Savings

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Women in Australia face specific issues when it comes to securing their financial future. Women have significantly less money saved for their retirement – the current average superannuation payout for women is 1/3 that of the payout for men [2]. This results in many women who are retiring on their own facing the possibility of doing so in poverty.
Why is this occurring and how can we help solve this issue?
Lack of superannuation savings can arise from a number of scenarios. Women are more likely to work part time to allow them to perform unpaid work such as caring for family members as well as managing the majority of domestic work at home – whilst the majority of men work full time performing less of these duties.
Women’s employment also tends to congregate in low paid areas such as retail, front line financial services as well as health care and social assistance. Women also often find they sacrifice income for flexibility in working arrangements to allow for their caring obligations.
So how can we address the issue of low super balances?
In my view, one of the ways we can drive cultural change is for both men and women to push for flexible working arrangements. This means challenging the traditional view that men should maintain full time employment whilst women drop to part time employment to raise their young children. If both men and women have access to flexible work hours, then it becomes easier to juggle the caring requirements of young children. This in turn should allow women to work additional hours and build larger superannuation balances in their own right.
What can we do from a practical sense in the mean time?
As a financial planner, we have a number of superannuation strategies we utilise for our clients, each with various benefits. Please seek advice to determine whether these strategies will suit your personal situation.
Contribution Splitting: In certain circumstances, an individual can split up to 85% of their previous years concessional (employer) super contributions with their spouse. This strategy has significant planning benefits including:
• Managing equalisation of superannuation account balances between spouses given the new $1.6 mill cap. Where one client is on track to build a large superannuation balance close to the new $1.6 mill cap, splitting up to 85% of contributions each year can allow the spouse with the lower balance to take full advantage of their cap.
• Where spouses have an age difference, there may be a difference in the years where superannuation can be accessed. Splitting contributions to the older spouse means superannuation benefits that would otherwise not be eligible to be accessed due to age restrictions, will become accessible to the elder spouse earlier under the low-rate tax threshold.
• Where spouses have an age difference, there may be Age Pension planning benefits to split contributions to the younger spouse. This is because superannuation only becomes an assessable asset once you become eligible for the Age Pension.

Leanne is 57 and is planning on retiring in the near future. Her husband John is 47 and earns $100,000 p.a. as a contractor. During the year, John contributes $25,000 into his super, reducing his taxable income to $75,000. Then in August, John opts to split $18,750 into Leanne’s super. These contributions will boost Leanne’s balance and become available for her to withdraw from super tax free under the low-rate tax threshold when she retires – effectively allowing John to reduce his income tax whilst not locking away the funds until John retires.

Spouse Contributions and tax offset: In certain circumstances, if an individual has an assessable income (plus reportable employer super contributions and reportable fringe benefits) of $37,000 or less, their spouse can make a contribution of $3,000 into the low-income spouse’s super account and receive a tax offset of up to $540. This will boost the super balance of the spouse whilst saving tax for the high-income earner.
Tony currently earns $90,000 p.a. and is married to Sophie, who works part time earning $30,000 p.a. Tony receives a bonus and opts to contribute $3,000 into Sophie’s super fund. By doing this, Tony receives a rebate in his tax return which reduces the tax he will pay by $540.
So, if you would like to hear more about these strategies and how they can help you, please contact Income Solutions for a catch up.

[2] Ross Clare, ‘Are retirement savings on track?’ (The Association of Superannuation Funds of Australia Limited 2007).
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.
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