Time for women to get engaged – with their super

Sometimes just the smallest of changes can make a massive change to engagement and it turns out that superannuation is no different.

We have long known that employee engagement with superannuation in Australia is low, even if it is often their largest asset and also the key to a successful retirement.

Because super is mandated, many employees never spare a thought for the 11% of their salary that is being paid in super, or where it is invested and whether the fees, returns and insurance are competitive.

So, the bad news in Vanguard’s “How Australia Retires” study is hardly a surprise, with almost half of Australian women not having a clear strategy for retirement.

Almost half of women don’t have a retirement plan

The study of more than 1800 working and retired Australians revealed a stark difference in confidence levels when it comes to how men and women plan for retirement, with nearly 46% of women surveyed saying they “had no plan” or “did not know what they needed for retirement”.

That compared to 73% of men stating they have a “general”, “good” or “exact plan” for how they will financially prepare to reach the retirement lifestyle they want.

Half of the men surveyed also ranged from “very” to “extremely confident” about making decisions related to managing their finances, while only a third of female respondents indicated the same.

Looking at the problem from the other direction, only 11% of men surveyed indicated being “slightly” or “not at all confident” about their financial decision-making, in comparison to 33% of women surveyed.

However, the survey was not full of bad news for women, even though when it came to understanding investment products and services like stocks and bonds, a much higher proportion of women responded that they feel “not at all confident”.

A hopeful sign for women who make a contribution

The glimmer of hope in the survey was that female pre-retirees who make regular voluntary super contributions feel more confident that they will be able to fund the retirement lifestyle they want.

Of this group, nearly 40% are confident they can fund the lifestyle they want in retirement compared to the 19% of women that don’t.

It is not hard to guess why – if you are deliberately deciding to make an extra contribution into super you are probably much more likely to ensure they are being invested well in a fund with good performance and low fees.

In short, it is likely that you will have a strong engagement with your fund and are much more involved in making plans for what your retirement will look like.

For those who don’t make extra contributions, a full 40% of these women are “not at all” or only “slightly confident”.

Women start off behind the eight ball

“There’s a whole spectrum of circumstances that mean women aren’t on equal footing when it comes to being able to prepare for retirement or to retire well,” said Vanguard head of super, Shannon Nutter.

Among the circumstances she pointed to, on average, Australian women earn 13% less than their male counterparts, often work in industries with lower wages, take time off to manage home-related issues, care for children, and live longer.

“All this means that women need to save or invest more to retire well but have less assets to start with,” she said.

How much will be enough?

Besides earning more money, which both genders reported as being a main driver of retirement preparedness, a better understanding of how much will be enough was cited by a high proportion of respondents.

More women think that ongoing guidance (30%), an age-appropriate plan from their super fund (27%) and having a clear understanding of what they could do to improve their financial outlook for retirement (34%) would be helpful in working towards the desired retirement lifestyle.

Ms Nutter said there are several personal actions that women can take but also said that other parties need to get involved including spouses, the government, and the superannuation industry which could provide better support for women.

“This analysis has highlighted in particular, the areas in which the industry can provide for female clients to ensure everyone, equally, can move more confidently towards a great retirement,” she said.

“Many studies including Vanguard’s own investor data show that women are typically very disciplined investors. They are less likely than men to take on too much risk and tend to maintain a long-term view rather than engage in trading behaviours to score a quick return.

“These traits are considerable strengths which can enable women to take charge of their own financial lives,” Ms Nutter concluded.