Dear Mr Abbott,
I am writing on behalf of your daughters, and indeed all women in the country you lead.
We face financial ruin, but most of us don’t realise it. We think our superannuation system is ticking away in the background, taking care of our future while we’re busy taking care of everything else. Instead, super is inherently sexist. And if we don’t act together I have no doubt the new GFC will be the Girls’ Financial Crisis.
We live 4.4 years longer than men – and no, I know there’s nothing you can do about that. I only point it out because it means our super stash has to stretch further.
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The problem is that super is earnings-based, so our stashes are invariably smaller than our male counterparts’.
Remember that we earn 18 per cent less than men – yes, still.
We also still typically take ‘breaks’ to raise children (and I write on behalf of men who take career breaks, too – this will also be an issue for them).
A pretty standard five-year full-time career break will slash $46,000 from our retirement and see our money run out three years sooner, say number crunchers RiceWarner Actuaries. (That’s based on one year out for the first child, part-time for the next two years and then another year out and another part-time, so it’s conservative.)
Already women are retiring with much less super than men: $105,000 versus $197,000. And single, 60-year-old women have the highest poverty rate in the country.
The knowledge that super is creating a new underclass is completely flying under the radar. Meanwhile, we’re constantly told that the age of entitlement is over; when many of us get there, the pension may even be gone.
Here’s how you can help us, Mr Abbott*:
1. Remove the crazy rule that means you have to earn $450 a month for an employer to pay super. We often work casual or part-time for years (sometimes at several jobs) as we phase back into the workforce.
2. Push ahead with the super part of your paid parental leave scheme. This represents only a tiny fraction of the $5.5bn potential cost, but because those earlier years are the most important for compounding, it would make a massive difference to our ultimate balances.
And here’s how we can help ourselves:
1. Do our utmost to salary sacrifice 2 per cent extra at all times we are working – because this is before tax, it will cost far less.
2. Take advantage of government giveaways to boost our balances, like the super co-contribution and spouse contribution tax offset.
3. Actually read our super statements and ditch dud funds (those that made less than the 13 per cent median last year and less than 9 per cent a year over five years). Just 1 per cent extra in returns or fee savings from age 25 can mean $250,000 extra at retirement at age 70, says Rainmaker research.
If you do your bit and we do our bit, this serious new GFC can be entirely averted.
We – and your daughters – will thank you.
Yours sincerely,
Nicole Pedersen-McKinnon
Founder, TheMoneyMentorWay.com
