By the age of retirement, the average working woman will have lost $160,000 in superannuation due to career breaks, according to REST Industry Super.
To determine the financial impacts of career breaks on working Australians, the superannuation fund commissioned research, including a survey of 1030 men and women who had taken a career break of at least three months.
The researchers found that just 6% of women sought professional advice ahead of their career break, while less than one in five (16%) made a voluntary superannuation contribution during their break. Despite being 13% more likely than men to take a planned career break, women were 30% less likely to make superannuation plans ahead of each career break.
Accounting for the gender pay gap (15.3%) and the finding that women tend to earn 29% less than men upon returning to work after a career break, REST calculated that an average working woman will retire with a superannuation balance that trails her male counterpart’s balance by 32% (or $283,000) in circumstances where both took a career break.
It was found that the average working woman takes 4.2 career breaks, with the primary reason being maternity leave (50%) followed by leave to take care for children (49%) and health reasons (45%). REST calculated that a woman who takes 4.2 career breaks will take a $159,590 hit to their retirement savings in circumstances where they retire at the age of 67 and only makes compulsory super contribution (9.5%)
Mary Atley, General Manager of Brand, Marketing and Communications with REST told Dynamic Business that women can seek to reduce this potential loss by considering the financial impact career breaks can have on their retirement savings, engaging with a financial adviser ahead of any career break and otherwise ‘more effectively’ plan for their retirement.
“We’re realistic – some career breaks do come out of the blue, which is why we suggest women consult a financial advisor,” she said.
“This is to ensure they are prepared for the unexpected and are set up for a better retirement. If possible, women should also try to continue making voluntary contributions throughout their break, as it would make a huge difference to their super balance overtime. We also encourage women to check their super investment choice to ensure it suits their current life stage and explore their eligibility for spousal contributions.”
Atley explained that, just as with many women entering a career break, voluntary superannuation contributions were not always front of mind with small business owners.
“We’ve previously found that only one-third of owners surveyed consider superannuation to be critical to their retirement,” she said.
“Conversely, over half consider the sale of their business to be very important in funding their retirement. They appear to be in a situation where future retirement savings are locked in their business and so the success of this business is an integral part of their retirement plan.
“This leads us to believe that while business owners place some importance on superannuation as a retirement savings strategy, it is not necessarily the primary strategy for funding their retirement. For many owners, accumulating wealth over time through superannuation is thought to be less important, with many instead focusing on the value of their business as a means of funding their life after work.”
Atley said long-term retirement planning was often an ‘afterthought’ for many SME owners due to the day-to-day pressures of running a business, including the management of cash flow and operational costs.
“Business owners may wish to consider the value of financial advice in relation to retirement planning – or to at least include discussions with a financial advisor when considering their retirement planning,” she said.