One choice all women can make: Get interested in super - Women's Agenda

One choice all women can make: Get interested in super

An excellent research paper released by The Australia Institute this week, titled: ‘What’s choice got to do with it?’ highlights the many social, economic and cultural factors that combine to disadvantage women financially throughout their lives.

The report takes issue with the notion that these financial disadvantages are a result of deliberate choice. To quote: “The notion of individual choice as an explanation for structural disadvantage is not new, but – in the context of the political debate around the equity and adequacy of Australia’s retirement income scheme now and into the future – is it helpful or fair to imply that the entrenched long term financial disadvantage of women is somehow their choice?

No. It is most certainly not fair and not constructive. The report points out that this financial disadvantage is magnified at retirement, when the superannuation nest egg accumulated by many women is significantly less than their male counterpart. And given that the compulsory superannuation guarantee system as we know it has been around for a mere two decades, this financial divide will only become more extreme over time.

Minimising or eradicating this financial divide will require genuine effort over many years by government, employers and women. There is, however, one choice that women can make right now that has the potential to significantly improve their retirement outcomes: taking an interest in where their superannuation is invested.

It is a regrettable fact that member engagement with superannuation is low, across both males and females and throughout Australia. Many workers would have trouble answering the following two questions:

  • Do you know the name of your superannuation fund?
  • Do you know the asset mix of your investments?

The undeniable truth, though, is that the asset mix of your superannuation investment can impact on your retirement security. Here’s an example, using the most recent 10-year returns from a well-known industry fund: the 10-year net return of their default product – the Balanced option – is 7.1%. Not too bad, considering that period includes the GFC. It’s worth noting as a side issue that according to APRA statistics, approximately 68% of invested money with this Fund is in their Balanced option. On the other hand, the Fund’s Australian Shares option has returned 9.6% over that same 10-year period – albeit with more year-by-year volatility.

Now: a 21 year-old female on a salary of $50,000 (indexed at 2.5% each year), receiving 12% super contributions each year and who retires at age 60 – with three years out of the workforce along the way – could expect to have accumulated just over $1 million at retirement ($1,012,555 to be precise) by receiving an average annual net return of 7.1%. If that same worker was receiving an average annual net return of 9.6% though, her nest egg could be $1,653,770. More than $640,000 difference from receiving a higher annual return.

Of course keep in mind that investment performance is not guaranteed and that high-growth investments such as shares and property are likely to experience more year by year volatility than a lower-growth mix. Nevertheless, women should take an active interest in their superannuation and seek professional financial advice to invest their super appropriately. It won’t help to overcome the legislative and cultural causes of financial disadvantage – I suspect that will be generational change – but it will nevertheless help to make a person-by-person difference.

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