The terms of reference of the inquiry are comprehensive. This chapter
provides background to the report and provides an overview of Australia's
retirement income system. This chapter also briefly outlines the gendered gap
in pay, the gap between the accumulated wealth and retirement savings of men
and women, the factors across women's working lives that affect their economic
security in retirement, the economic security of women currently in retirement
and the need for both short and longer term measures to improve the economic
security of women in retirement.
Australia's retirement income system
Australia's retirement income system is made up of three complementary elements,
a publicly-funded, means-tested Age Pension;
mandatory employer contributions to private superannuation; and
voluntary savings—including voluntary superannuation and other
long-term saving through property, shares and managed funds.
Pillar 1—Age Pension
Introduced in 1909, the Commonwealth Age Pension was originally designed
as a social welfare safety net for those not able to support themselves fully during
retirement. The Age Pension is Australia's largest social security payment,
totalling an estimated $44 billion in 2015–16. The maximum rate of the Age
Pension is $784.80 per fortnight for single persons and $599.10 per fortnight
for each member of a couple.
Generally, the Age Pension is available to men and women aged 65 years and over
who are citizens of Australia and have been permanent residents for at least
10 years, with eligibility subject to means testing in the form of an
income test and an assets test.
Pillar 2—compulsory superannuation
Superannuation was fairly uncommon in Australia until the 1970s, when it
began to be included in industrial awards.
In 1985, only 39 per cent of the workforce had superannuation—24 per cent of
women and 50 per cent of men had access to super.
At that stage, superannuation coverage was concentrated in higher paid
white-collar positions in large corporations and, in the public sector.
Superannuation became a major component of Australia's retirement system
following the introduction of the Superannuation Guarantee in 1992. The Superannuation
Guarantee requires employers to contribute a percentage of an employee's
earnings into a superannuation fund, which the employee cannot access until
they reach the superannuation preservation age. For most employees, superannuation
coverage expanded following the introduction of compulsory superannuation. In
1993, 81 per cent of employed Australians were covered by
superannuation and the gender gap in superannuation coverage had narrowed, with
82 per cent of employed men and 78 per cent of employed women covered by
superannuation. The employer contribution rate has increased over time, from 3 per cent
in 1992 to the current rate of 9.5 per cent.
Pillar 3—voluntary savings
The largest asset for most Australian households is housing followed by
superannuation. Other financial assets such as shares, managed funds and cash
in bank accounts make up a much smaller proportion of household wealth. In an
effort to encourage Australians to make additional savings for their
retirement, governments have implemented a range of incentives, such as the
introduction of the superannuation co-contribution scheme. The upper age limit
for voluntary superannuation contributions has also been increased from 65 to
75 years for older workers, on the condition that they remain attached to
Other factors affecting economic
security in retirement
Retirement income is not the only factor contributing to economic
security in retirement. Access to affordable housing, health and aged care are
also fundamental to ensuring economic security and allowing people to maintain
their living standards in retirement.
Gender pay gap, gender retirement savings gap, and gender wealth gap
The gender pay gaps and gender wealth gaps that persist over women's
working lives contribute to the gap in retirement savings and the disparity in
men's and women's economic security in retirement.
Gender pay gap
A significant contributor to the gender gap in retirement savings is the
gender pay gap. The gender pay gap is the difference between women's and men's
average weekly full-time equivalent earnings, expressed as a percentage of
men's earnings. The gender pay gap was 18.8 per cent in November 2014, and was
17.9 per cent in November 2015. The Workplace Gender Equality Agency
(WGEA) noted that over the past 20 years the gender pay gap has hovered
between 15 and 19 per cent.
The gender pay gap increases to 23.9 per cent for full-time workers when
taking into account total remuneration, which includes superannuation,
overtime, bonus payments and other discretionary pay. Men working full-time
earn around $17,000 more than women each year in their base salary, but this
extends to $27,000 when assessing total remuneration.
There are a number of interrelated work, family and societal factors
that influence the gender pay gap. Stereotypes still persist about the type of
work women and men 'should' do, and the way women and men 'should' engage in
the workforce. Factors that contribute to the gender pay gap include:
women and men working in different industries (industrial
segregation) and different jobs (occupational segregation). Historically,
female-dominated industries and jobs have attracted lower wages than
male-dominated industries and jobs;
a lack of women in senior positions, and a lack of part-time or
flexible senior roles. Women are more likely than men to work part-time or
flexibly because they still undertake most of society’s unpaid caring work and
may find it difficult to access senior roles;
women's more precarious attachment to the workforce (largely due
to their unpaid caring responsibilities);
differences in education, work experience and seniority; and
discrimination, both direct and indirect.
The gendered disparity in earnings begins when women first enter paid
employment, with female graduates earning less than men, on average. While the gender
pay gap exists across all age groups, the divergence between male and female
earnings increases after women reach 25–34 years of age, which reflects a
reduction in workforce participation by women when they have children.
Gender pay gaps represent a career long penalty for women which is
reflected in prospective lifetime earnings. The figure below shows the gender
gap in prospective lifetime earnings across education groups.
Gender gap in lifetime earnings, million dollars
Recent research by the WGEA and Bankwest Curtin Economics Centre showed
...if women and men move through managerial positions at the
same pace, working full-time and reaching a KMP [key management personnel] role
in their tenth year, men can expect to earn $2.3 million and women $1.7 million
in base salary over this period—a difference of $600,000. Even in a scenario
where women move towards a KMP role at a rate twice as fast as men their
accumulated earnings would will still be lower than men's—$1.6 million
compared to $1.7 million.
Based on the 2015 Organisation for Economic Co-operation and Development
(OECD) Indicators of Gender Equality in Employment data, Australia had
the 24th largest gender pay gap of the 34 OECD countries.
Australia's gender pay gap of 17.9 per cent is above the OECD average
of 15.5 per cent.
Retirement savings gap
As the Senate noted at the time the inquiry was referred, on average
women retire with approximately half the level of retirement savings of men. In
2011–12, the average superannuation balance at retirement was $105,000 for
women and $197,000 for men, resulting in a gender retirement superannuation gap
of 46.6 per cent.
The committee acknowledges that the average superannuation balance at
retirement for both women and men is low, and measures should be taken to
improve this level.
The table below shows the disparity between men's and women's
superannuation balances over time across all age groups.
superannuation balances by age, 2011-12
Women’s average superannuation
Men’s average superannuation
Gender superannuation gap
The gender gap in retirement savings is the result of a combination of
interrelated factors across the course of a woman's working life. These factors
the gender pay gap—men earn more, on average, than women, and as
compulsory employer superannuation contributions are based on a percentage of
income, they will be higher for men than for women;
time out of paid employment—women are also more likely to take
time out of paid employment to care for children or other family members and
therefore miss out on employer superannuation contributions; and
differences in working hours—women are more likely to work
part-time because of caring responsibilities and therefore earn less and
receive lower levels of employer superannuation contributions.
Gender wealth gap
The gender wealth gap refers to the difference between men's and women's
accumulation of assets. In 2006, the accumulated wealth of single adult men
was, on average, 14.4 per cent higher than that of single women.
Although female labour market participation has increased, the rate of wealth
accumulation by single women to finance retirement needs has been slower than
that of single men's. The gender wealth gap among single men and women more
than doubled from 10.4 per cent to 22.8 per cent between 2002 and 2010.
There is also a difference in the composition of women's and men's
wealth. Among single, older women, 60 per cent of their assets and 74 per cent
of their total debt relates to the family home.
In particular, single women hold a higher proportion of their assets in their
home than single men, and divorced women have significantly lower asset
balances than widows.
The composition of wealth held in superannuation for women is 12.4 per
cent compared to 18.8 per cent for men.
Bankwest Curtin Economics Centre explained:
The factors contributing to the gender wealth gap extend
beyond commonly identified labour market differences between men and women
(such as lower rates of labour force participation and lower wage rates). The
negative effects of single parenthood are particularly severe for women, and
additional barriers to wealth accumulation exist for women from culturally and
linguistically diverse backgrounds and those living in rural areas.
Women's working lives
Industrial and occupational
Historically, female-dominated industries and jobs have attracted lower
wages than male-dominated industries and jobs. This is evident early in women's
working lives in the gender pay gap for graduates.
Although women outnumber men graduating from higher education, the starting
salaries for male graduates are higher than for women:
female graduate salaries are 95 per cent of male graduate
salaries (a difference of $2,000 per annum); and
female postgraduate salaries are only 82 per cent of male postgraduate
salaries (or $15,000 per annum).
This gap in graduate and postgraduate salaries is in part due to fewer
women working in higher paid occupations such as science and engineering. Instead,
women are more likely to be employed in lower paid occupations. For example:
women make up 60–70 per cent of workers in three lower paid
occupations—clerical and administration, community and personal services and
women make up 60–80 per cent of workers in lower paid health, social
assistance, education and training industries.
Career breaks, unpaid care and
The female workforce participation rate in 2013–14 was 65 per cent,
compared to 78.4 per cent for men. Women were more likely to be employed
part-time, with 43.4 per cent of employed females aged 20–74 years employed
part-time compared to 14.4 per cent of employed males in the same age group.
The Australian Human Rights Commission's Investing in care:
Recognising and valuing those who care report observed that the current
superannuation system, which is tied to paid work, results in inequitable
outcomes and savings for women who are, or have been, unpaid carers.
Women are more likely than men to provide unpaid caring work;
Women made up the majority of carers, representing 70 per cent of
primary carers and 56 per cent of carers overall;
Women comprised 92 per cent of primary carers for children with
disabilities, 70 per cent of primary carers for parents and 52 per cent of
primary carers for partners. While 57.5 per cent of mothers whose youngest
child is aged
0–5 years were participating in the labour force, 94 per cent of fathers,
whose youngest child is 0–5 years, were working or looking for work; and
63 per cent of employed female parents are employed in part-time
work, compared to 7 per cent of employed male parents.
In its earlier 2009 report Accumulating poverty? Women's experiences
of inequality over the lifecycle, the Australian Human Rights Commission
noted that the limited availability of flexible work arrangements and quality
affordable childcare present a barrier for women's participation in the paid
workforce and, subsequently, the accumulation of retirement savings in
Women in leadership
The 2015 ANZ Women's Report: Barriers to achieving gender equity
observed that although women in Australia are better educated and have more
employment opportunities than ever before, they remain under-represented in
senior leadership roles in both the corporate and public sectors:
women make up 20.4 per cent of ASX 200 board positions;
women represent 17.3 per cent of CEOs, 26.1 per cent of key
management personnel, 27.8 per cent of other executives/general managers, 31.7
per cent of senior managers and 39.8 per cent of other managers; and
women represent 31 per cent of all federal, state and territory
The factors contributing to low female representation in senior
leadership positions include unconscious bias in the workplace, and a lack of
flexibility in senior management roles.
The WGEA noted that only 6.3 per cent of managerial roles are offered on a part-time
Women approaching retirement
As access to superannuation was limited prior to 1992, many women
currently approaching retirement have only had access to the superannuation
system for part of their working life. In addition, the rate of the
Superannuation Guarantee, which only increased gradually from 3 per cent in
1992 to 9 per cent in 2002, and did not again increase until 2013, has been
insufficient to result in adequate superannuation savings.
Women in Super noted:
Even for women coming up to retirement the picture is not
good. The median superannuation account balance for a women aged 55–64 years is
$80,000 (for a man in the same age group it is $150,000) and 1 in 3 women
currently live alone between the ages of 55–70 years. Many females will need to
work longer than their male colleagues in order to save more for retirement.
Reasons for this include the gender pay gap, career breaks and not being
allowed to participate in earlier schemes due to their sex and prevailing
belief that their husbands would provide for them.
Women in retirement
Women are at greater risk of experiencing poverty in retirement.
Older single women are one of the fastest growing cohorts of people living in
According to the Household, Income and Labour Dynamics in Australia (HILDA)
Survey, in 2012, 38.7 per cent of older single females were living in poverty.
As women currently accumulate significantly less savings for their
retirement, women account for over half those receiving the Age Pension, and
single women are most likely to be solely reliant on the full Age Pension for
The Australian Human Rights Commission provided the following statistics:
In 2011, women comprised 56.5 per cent of the 2.23 million
recipients of the age pension. Just over half (53.6 percent) of female age
pension recipients were single and 71.8 percent of single age pension
recipients are women. Sixty-one percent of female age pensioners received the
maximum rate, and 27.3 percent were not home owners.
Women have a higher life expectancy than men which exacerbates the
effect of the retirement savings gap. Women are also more likely to re-enter
the workforce after retirement due to financial constraints, and are twice as
likely as men to sell their house and move to lower cost accommodation due to
financial circumstances in retirement.
It cannot be assumed that women will be able to rely on a male partner's
savings for financial support in retirement, as one third of women are not in relationships
by retirement age, and 40 per cent of couples will not have sufficient savings
to cover the gap in women's superannuation.
As one submission observed, 'a husband isn't a superannuation plan'.
Research by the Australian Institute of Family Studies (AIFS) found that
retirees often coped with the change in their financial circumstances in
retirement by cutting back on normal weekly spending. It noted that this was
more common for women, particularly single women, with 30 per cent reporting they
had cut down on weekly spending, compared to 21 per cent of partnered women.
Dr Debra Parkinson, Women's Health in the North, explained that many
women involved in the Living Longer on Less research project were going
without in retirement. She stated:
The women we spoke to said they could not afford power. Their
strategies were to sit with a hot water bottle and a blanket at night, and they
would light candles rather than turn on the power. Our connections with the
Metropolitan Fire Brigade say that they know about this. There are fires that
should not be happening because people are saving money on power. They try to
save on food by rarely eating meat or fish or by no longer having three meals a
day. One ate just fruit and vegetables all week, and she would shop on a
Saturday, just before the markets closed, to get the old fruit and vegetables.
A couple of women said they had not had a professional haircut for a decade.
Some had no money for even a $4 cup of coffee, which meant they could not
socialise—they were too embarrassed that they could not pay for a cup of
Need for long and short term approaches
Many submissions and witnesses highlighted the need for long and short
term approaches to address the need to improve women's economic security in
retirement. The Age and Disability Discrimination Commissioner, the Hon Susan
Ryan AO, expressed concern that most of the underlying causes of the
gender gap in retirement savings will require a lot of work and are unlikely to
be resolved in the near future. She stated:
I am concerned not only for the women who are now approaching
retirement—say, women in their 60s or late 50s—who in general will not have
adequate retirement savings and may, in some circumstances, be facing an old
age of poverty, but also younger women who, because of these entrenched
inequalities in pay, caring responsibilities and so on, will, as we go forward,
still be facing poverty in retirement. So I think it is important to look at
immediate changes that could be made as well as those that could be made in the
The AIFS also noted the need for longer and shorter term approaches to
addressing women's economic security in retirement:
...the current situation in which the majority of retirees are
reliant on the age pension as their main source of retirement income; and
single women are the least likely to be able to afford even a modest lifestyle
in retirement. Changes to superannuation policy to address the issue of the
gender gap in superannuation savings, along with policies that encourage the
increased labour force participation of women, may assist retirees in decades
to come. However, for the current cohort of retirees, these changes will have
no effect on their standard of living. For those who are already in retirement,
policy reform targeting assistance to those in genuine financial hardship is
the only type of reform that will bring real improvements to living standards.
This chapter has provided a brief overview of the retirement income
system, and the various factors that contribute to women's economic security in
retirement, highlighting the need for a multifaceted approach incorporating
both long and short term measures to improve retirement outcomes for women.
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