A good time to think about financial security
International Women’s Day is a global day to celebrate the social, economic, cultural and political achievements of women.
It’s also an opportune time to raise awareness of the pressing issues still impacting gender equality. One of these is the financial security of women – particularly when it comes to their superannuation balances.
Research commissioned by Rest in 2017 revealed the overwhelming majority of women do not make a financial plan or seek financial advice ahead of planned career breaks, potentially causing a $159,5901 hit to their retirement savings.
The research examined the financial impacts of career breaks on working Australians. It found 53 per cent of the respondents admitted they didn’t consider the long-term financial impacts of their career break.
It also revealed that just six per cent of women participating in the survey sought professional financial advice before taking their career break, and only 16 per cent made a superannuation contribution during their break. By comparison, 15 per cent of the men surveyed said they sought professional advice, and 28 per cent continued to make super contributions.
Due to this, and lower average earnings, women who have taken a career break are predicted to retire with an average superannuation balance of $283,1412 less than their male counterparts.
The research also found that women take 4.2 career breaks on average, lasting for an average of 17.6 months.
Women take their career break at an average of 33 years old, with maternity leave (50 per cent) the primary reason, followed by leave to care for children (49 per cent), and health reasons (45 per cent).
Their return-to-work salary is on average 11 per cent less than their pre-break salary.
It’s important that all Australians, particularly women, consider the financial implications to their retirement savings of a career break.
With most career breaks arising by choice, there is opportunity to consult a financial adviser about keeping up superannuation contributions and building a financial plan.
About the research
The survey was conducted by Lonergan Research between 4 October and 9 October 2017 of 1,030 Australians (both males and females) who have ever taken a career break of at least three months.
1 Lonergan Research economically modelled the amount of lost superannuation of working women at the retirement age of 67 between those taking no career breaks and those taking career breaks, of which they took 4.2 career breaks on average. The calculations are based on self-reported cost per career break; 9.5 per cent compulsory contribution to superannuation is assumed for the entire working life; 15 per cent contribution tax; and superannuation account balance is compounded annually at 4.95 per cent (based on average 10-year rate of return after tax and fees from APRA Annual Fund-level Superannuation Statistics 2016). No voluntary contributions are modelled. The results are on 2017 Australian dollars with no adjustment for inflation.
2 This is the economically modelled average difference of superannuation balance by the retirement age of 67 between men and women if they took one career break.