The retirement savings gap is moving in the right direction

The median retirement savings gap for women is 23.4% lower than for men, down from the 47% gap cited by commentators, according to one study.

However, according to research by the Association of Superannuation Funds of Australia (ASFA), the median figures were still well below the amounts needed to maintain a comfortable standard of living in retirement.

ASFA Chief Executive Martin Fahy said: “While there is still a lot of work to do, we are fortunately starting to move in the right direction in terms of closing the gap between retirement savings men and women.”

In the two years to June 2019, the average balance for men increased by 10.8%, while that for women increased by 12%. Women held about 42.5% of total pension assets, up from 41.9% two years earlier.

For those aged 60 to 64 in June 2019, the average balance for men was $359,870 with a median of $178,800 and for women the average balance was $289,180 with a median of $137,050 $. The retirement savings gap based on the median figures was 23.4%.

Fahy said: “Although it will take more than 30 years before most retirees have fully benefited from the pension guarantee, the proportion of new retirees who are fully self-funded has increased.

“Moving statutory contributions to 12%, along with other targeted policy measures, is needed to close the retirement savings gap for many Australians.”

Absence from the paid labor force for family responsibilities had a significant impact on the pension balances of retired women. The analysis in the paper indicated that taking a gap year for each of two children could lead to a 10% reduction in the superannuation upon retirement.

ASFA’s analysis also showed that the introduction of a baby bonus of $5,000 from Superannuation together with the payment of the Superannuation Guarantee on paid parental leave would largely eliminate this deficit.

The document also contained data on the retirement of Aboriginal and Torres Strait Islander people and people born in non-English speaking countries. On average, their super balances were lower than those of the general population. Targeted measures, such as extending tax compensation for low-income retirement pensions, would help these groups and low-income people more generally, according to ASFA.