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The ASFA 2012 Conference started yesterday at Darling Harbour. The Convention Centre was humming with over 2000 participants, 1600 delegates and a record-breaking 30 international delegates from countries as diverse as the United States and Tonga.
As ASFA celebrates 50 years, and the theme for this year is ‘New Directions’.
Before the first Plenary session began, Women in Super, the peak association which provides networking, education, training and support for women working in super and financial services, held a morning tea for women.
Melissa Fuller, Deputy CEO of Rice Warner Actuaries was the guest speaker, and she spoke to the big issue for women - retirement adequacy and how to improve it.
Rice Warner have recently completed some case studies about retirement gaps for men and women, and Ms Fuller started with some not so startling, but nonetheless alarming statistics about the gender gap as it stands.
Women live on average 3 years longer than men, yet they tend to have 30% less in retirement savings and are more likely than men to rely on the full aged pension. Indeed, 78% of women over 65 currently live on a full aged pension.
And that’s pretty depressing, particularly given that the full aged pension is $20,088 per annum. ASFA says that an annual income of $22,539 could be described as ‘adequate’, but also says that for a ‘comfortable’ retirement, $40,412 is more realistic.
That means that for the 78% of women over 65% currently living on the aged pension, their retirement could not even be described as ‘adequate’.
We all know that there are many so-called ‘barriers’, usually described at ‘lifestyle events’ that prevent many women from having adequate retirement savings. Ms Fuller ran through the case study results on just this topic, comparing differences in retirement savings of four typical people: a man who has no break in employment, and three women, one with the same career trajectory as the man, one who has taken 5 years out of the workforce, but has worked part time for 3 of these years, and finally one who takes a longer period out of the work force, working part time initially and then returning to full time work after 10 years.
Needless to say, the differences when it came to retirement savings were significant. It is already true that men earn on average 17.5% more than women for the same work, but what is also true is that promotional opportunities and the pay increases which we all hope accompany full-time, uninterrupted work are often given during the time that many women are out of the workforce raising children. This means that when these women do return to the workforce, they are already miles behind the men.
So, we know there is a problem, but what is the solution?
Ms Fuller said that it was the responsibility of the four major players in the system to all play their part. Some of the suggestions were as follows :
Government should consider initiatives such as including super contributions in paid parental leave and think about removing the $450 threshold for super to be paid.
Employers need to be flexible and innovative in the way they allow employees to work. Ideas such as allowing long service leave to accrue even when on parental leave were raised, as was employers paying additional super for women to offset the gaps in their working life. Rice Warner itself is trying to implement this system, and put forward 10.5% as an appropriate level, ie 1.5% more than the current superannuation guarantee of 9%.
Individuals need to be engaged. And this is a significant issue, as getting young people to think about their retirement savings is no easy task. However, if everyone could salary sacrifice from a young age, or at the very least consolidate their super accounts and contribute regularly, the benefits can be huge. Extra contributions of just $20 per week can add up to a massive $120,000 over a working life.
Super funds themselves were urged to address the problem by tailoring their communication to women and talking to them directly, driving more engagement by women in the management and control of their super. She also spoke of freezing fees on balances when balances were stagnant, for example when women were on parental leave.
Ultimately, Ms Fullers message was heartfelt and powerful.
For many of us, we will spend more time in retirement than we do working, so preparing for more than just an ‘adequate’ retirement, or worse, should be of serious concern.
And if you happen to be a women, addressing the gap and accruing adequate retirement savings, for now, should be our primary concern.
