iSUPER® Insights: Is there a gender gap emerging in superannuation?
It has been well documented that there is currently a pay inequity between men and women. Australian Bureau of Statistics data for May 2014 suggests that the average full-time ordinary earnings for women is around $15,000p.a. less than for men.
A flow-on effect of this, that is easily overlooked, is the impact it has on your compulsory employer contributions and eventual retirement savings.
In this article we examine the effect this is having on superannuation, and ways in which it can be mitigated, to help you build the retirement nest egg you require.
Given that the average earnings for women are around $15,000p.a less than their male counterparts, this translates to approximately $1,400 less per year going into their superannuation. This difference over the working life of, say, 35 years with a growth rate of 5% will result in an after tax detriment of approximately $92,000!
Here are some of our thoughts on how this variance could be mitigated.
1 Consider topping up your superannuation
Salary sacrificing into superannuation is a tax effective way to increase your superannuation balance. By making a small annual contribution can have a big impact on your final superannuation balance.
Let’s take the example of salary sacrificing $1,400 per year of your pre-tax salary. If you are earning between $37,000 and $80,000, the net amount that comes out of your net pay is around $77 a month!
Over 35 years, as shown above, this could potentially increase your retirement balance by $92,000.
2 Time off to raise a family…consider spouse contribution splitting
This can be a strategy used where the decision has been made to have one parent stay at home to raise the family. Given they are out of the workforce, they may not have the regular income coming into their superannuation fund and therefore their retirement balance will be effected.
Here is a way to help minimise the impact on your super which you may not be aware of…spouse contribution splitting.
Contribution splitting is where the employer payments or personal contributions for your spouse (including de facto and same sex partners) can be allocated to you. This may be an option to boost your superannuation balance and, the good news for your partner, is that the personal contributions can be deductible if they are made as concessional contributions.
As always, please seek professional advice before implementing this strategy. You will need to be mindful of the contribution limits and the tax effectiveness of the “split” amount.
3 Where does your partner’s superannuation go when they die?
Although this is a difficult topic, we do see situations where a spouse’s intention was to leave their superannuation to help their partner, however due to the fund not being properly structured, the benefit went elsewhere.
The importance of having the correct structure in place (such as a Binding Death Benefit Nominations or reversionary pensions) is that without it, your spouse’s superannuation balance might end up going to their estate. This can mean that there are more beneficiaries have access to it, or it is used to pay any creditors of the estate ahead of you.
If you want a real live court case (and you have insomnia) consider reading McIntosh v McIntosh  QSC 99 (http://www.austlii.edu.au/au/cases/qld/QSC/2014/99.html). This is a classic example of losing control of your superannuation benefit through poor structuring.
4 Should your spouse have life insurance in their superannuation fund?
Holding insurance in your superannuation can provide additional piece of mind should something happen to your spouse.
Generally, by having insurance in superannuation the surviving spouse can potentially receive a lump sum tax free. This can provide the piece of mind that your mortgage is looked after and there are no other financial stressors in this difficult time. It is also worth noting that the premiums for the insurance that are paid out of the fund will be tax deductible.
If you are considering having your spouse’s insurance through superannuation, please refer to an expert. If you would like an independent review, please feel free to contact one of the iSUPER® team and we can organise that for you.
To find out more about the above strategies or other ways you can boost your retirement savings, please feel free to contact one of the iSUPER® team or complete our enquiry form here.