Category: Future Proof
Chapter Select
Sub category: Superannuation
9 June 2020

Go, girl! Super hacks to close the gap (FY19/20)

Ladies, it’s time to talk – about money. Your money. Specifically, your superannuation money.

To start the conversation, however, brace yourself: we have a little tough love to share and it’s not pretty.

Generally speaking, women are behind men when it comes to their super savings. And when we say behind, it’s way behind. Aussie women have about 40 per cent less in their super at retirement compared with men. That’s a whole lot of lifestyle to be missing out on.

The good news is there are things you can do to help even out the score. But first, let’s have a look at some of the reasons why there’s such a big super gap. And you’ve probably already guessed that one of the culprits is that other gap: the gender pay gap.

Lower average incomes, less time in the paid workforce, and more women than men working part-time or in less secure industries are some of the big factors that affect women’s super fund savings. The good news is that the wage experts and economists identified these factors several decades ago and the gaps are closing. But these big-picture solutions – such as gender equality, equal pay and more equal family caring duties – still haven’t caught up with women’s pay packets or their super funds.

So let’s talk about a little self-love for those who might want to boost their super savings until the cultural and workplace reforms catch up.

And just one more quick reminder about the importance of a healthy super balance: on average, women live about four years longer than men.1 If one gender needed more in their super than another, it would have to be women.

Okay, here are a few suggestions to help you start thinking about how to close the gap.

Extra deposits

According to Moneysmart’s superannuation calculator, carving out twenty dollars a week pre-tax when you’re 20 could mean $70K or more extra at retirement.2

Contributing to your super can be done in two ways: either before tax or after tax. If it’s before tax, it’s known as concessional contributions, or salary sacrifice, and often also means you can pay less tax, provided your total concessional contributions are within the $25K concessional contribution cap per financial year. For more information on the contribution cap limits, head to the ATO.

Or you can make extra deposits with money you’ve already paid tax on or from your after-tax take-home pay or things like windfalls. These are known as non-concessional contributions. There’s a cap limit of $100,000 per financial year on these after-tax contributions provided your total super balance is less than $1.6 million and you are under 65 years old. You can still make non-concessional contributions between 65 and 74 years of age and have less than $1.6 million balance, but you will have to satisfy the work test each year you want to make these contributions. You also have the ability to make more non-concessional contributions under the Bring Forward Rule. So it’s worth understanding these caps a little more by reading relevant information on the ATO website.

Sharing the spoils

If you have a partner or spouse, they can also deposit pre-tax money into your super fund by splitting some of their contributions to you – but, again, make sure these contributions don’t make you go over the $25K concessional contribution cap limit.

However, deposits can still be made into a partner’s super fund at almost any time from after-tax money to help close the gap between a high income earner and a lower income earner. Parents and grandparents might also consider contributing after-tax money to the super funds of younger family members to help boost their family’s long-term savings. Similar to the above, be mindful of the non-concessional contribution cap limits.

Tax and super

And just a final reminder as we head towards the end of the financial year. Earning up to $53,563 p.a. for the 19/20 financial year? You may also be entitled to a government co-contribution of up to $500 each. The amount of the government super co-contribution will depend on a person’s income (inclusive of employer super at 9.5% p.a.) and the amount of additional super contributions the person makes. Check out the ATO website for more info and eligibility. The ATO also has a co-contribution calculator

Which brings us to the final point for today. It’s almost tax return time, so now may be a good time to check that your super fund has your tax file number. Because unless your super fund has your tax file number, the government co-contribution of up to $500 can’t be paid into your super account.

Five reminders to help you close the super gap:
  • Extra contributions to your super fund could potentially add up to tens of thousands of dollars by the time you retire. ASIC has a great calculator on its Moneysmart website that you can play around with to work out how much you could be adding to your retirement.
  • Salary sacrificing extra contributions can be a good way to increase your super savings and could reduce your tax, but make sure your total super concessional contributions are within the concessional contribution cap. More info here.
  • Just make sure you’ve checked the ATO website for concessional and non-concessional contribution caps, eligibility and other requirements.
  • Spouses, partners, friends and family can contribute extra money towards your superannuation.
  • Those earning up to $53,563 p.a. may be eligible for the government super co-contribution of up to $500 when they make additional concessional contributions. The government co-contribution can be paid straight into your super account if you have provided your super fund with your tax file number. The ATO will calculate the amount of the co-contribution based on the financial information you file in your tax return. Check out the ATO website for more info on whether you’re eligible.

If you need assistance with your superannuation, consider speaking to a financial adviser.

Did you know we can help you get started? As a Living Super member, you’ll get a complimentary session of single-issue advice with a qualified Money Coach from Link Advice (worth $340). Call an ING super specialist on 133 464 between 8am and 8pm Monday to Friday (Sydney time) to find out more.

1Women live longer than men: Australian Institute of Health and Welfare

2Using the Moneysmart super calculations and with assumption based on: 20-year-old with an annual $32K salary (before tax and super), retiring at 67, with an existing super balance of $5,500 balance, employer superannuation rate at 9.5% super, making additional concessional contributions of $20 a week. Based on ASIC’s default admin fee of $74 p.a., insurance premium of $214 p.a. and default investment option (with return rate of 7.5% p.a., tax on earnings at 7% p.a. and investment fees at 0.85% p.a.). All figures are rounded (to nearest thousand) and in today’s dollars adjusting for inflation at 2.5% p.s. and additional rise in living standards at 1.5% p.a. These examples are for illustration purposes only and are not guaranteed. Actual outcomes may differ. Investments may go up or down. All ASIC’s assumptions on its calculator are available on its website.

The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. Financial advice is provided by Link Advice Pty Ltd ABN 36 105 811 836, AFSL 258145.

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