The average superannuation balances of women are lower than those of men. On average, when women retire from the paid workforce they will have half as much superannuation as men (Olsberg et al, 2001). Fifty per cent of women who have either retired, or will retire within the next ten years, have less than $20,000 in superannuation, while 20 per cent have less than $5,000 (Austen et al 2002).
Women are concentrated in casual and part-time employment. They make up 71.2 per cent of all part-time employees and of employed women 45.2 per cent worked part-time (ABS Cat No. 6202.0).
This directly affects women's earnings, their likelihood of being paid overtime and to accrue superannuation. For those women who are on a low or insecure income, this may also affect their attitude towards long term savings plans.
On average women live longer than men. The current life expectancy of women is 83 years compared with men who can expect to live to 78 years2. Given this, and women's lower superannuation savings than men, the long term economic well being of women may be compromised and the importance of financial education increased.
Changing life events, such as leaving school, finding a job, marriage, becoming a parent, separation, divorce and widowhood impact upon women's needs.
The Australian Government has implemented several superannuation initiatives that will improve women's ability to accumulate superannuation savings through these varying life-stages. These initiatives include:
-
The removal of the Work test, which stipulated that a person needed to work 10 hours in a week some time in the past two years to be eligible to contribute to superannuation. The Work test was removed on 25 February 2004, and now women temporarily outside of the workforce can better save for retirement.
-
The Superannuation Co-contribution Scheme, which is an initiative whereby the Australian Government will match the superannuation contributions of eligible employees, up to $1,500 per year.
-
Super Choice, which allows more Australian employees to choose the superannuation fund into which their future employer superannuation guarantee contributions will be paid. The introduction of portability of accumulated benefits will also allow people to transfer their benefits between funds.
-
Super Splitting, which allows superannuation to be split on divorce by mutual agreement or court order. Parties are able to determine by what proportions their superannuation will be divided, if at all. The court, in making an order, is required to make a decision that is just and equitable in all the circumstances.
-
The Australian Government's allowing couples to split superannuation contributions for contributions made on or after 1 January 2006. This will provide a means for individuals to share their superannuation benefits with their spouse, allowing couples to access two eligible termination payment tax-free thresholds and two reasonable benefits limits.
In addition, the 2006 Federal Budget announced major superannuation reforms that will improve the retirement incomes of all Australians with superannuation accounts.
- The Better Super legislation has significant benefits for women, in particular changes to the pension taper rate, abolition of reasonable benefit limits and age based contribution limits.
[ top ]
2.1 What is financial literacy and financial education?
A useful definition of financial literacy is a process of making meaning of, and understanding, financial issues and situations. It requires:
- a set of prerequisite skills (which importantly include literacy and numeracy);
- knowledge of how to access information and resources;
- confidence in one's own skills and knowledge; and
- a set of values relating to personal financial responsibility.3
It should be noted that to become financially literate requires information and services to be available, accessible, useful and useable.
The Organisation for Economic and Organisational Development (OECD) defines financial education as:
... the process by which financial consumers/investors improve their understanding of financial products and concepts and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being 4.
In Australia today, there is no real lack of information available about current superannuation initiatives, but the information is often difficult to access and is not targeted specifically at women. The information does not appreciate the differing communication styles used by women, or the existing levels of understanding that they have about superannuation.
In addition, some women are not confident that the information they can access is impartial. A recent survey5 undertaken by the Women's Information Service found that despite access to information about superannuation 60 per cent of respondents did not feel confident or knowledgeable about growing their finances through superannuation savings.
The challenge is how to effectively educate women about their specific superannuation needs and requirements. To meet this challenge there is a need to understand the barriers that many women face in becoming financially literate. One of the initial barriers for women is that their lower superannuation contributions may make them feel it is too late to improve their financial circumstances. This can lead to feelings of fear and anxiety that may hinder women taking the first steps in securing their financial futures. In 2005–06 the Office for Women commissioned research into Financial Literacy among Marginalised Women.
The preliminary findings of this research, comprising of a literature review, roundtable discussions and focus groups, identified the following barriers to financial literacy:
- lack of reliable information about entitlements;
- lack of respite or child care to attend information seminars;
- discriminatory attitudes from some financial service providers;
- costs of travel to access services;
- unreliable internet access; and
- lack of culturally appropriate financial information.
[ top ]
2.2 Research
Generally, there is limited research about the communication strategies that work effectively to improve women's financial literacy.
A survey by Security4Women found that many women know little about superannuation and the importance of saving for retirement. The survey found:
- 51 per cent of women surveyed were unaware of their Superannuation Guarantee contribution entitlements;
- 62 per cent did not know how their superannuation was taxed;
- 55 per cent of women had two or more superannuation accounts;
- 43 per cent had never made a voluntary superannuation contribution; and
- 68 per cent did not know how much superannuation they needed to retire comfortably.6
Positively, 87 per cent of women who completed the survey indicated that they would like to manage their superannuation better.
A survey by the ANZ bank found a strong correlation between financial literacy and socio-economic status. It also indicated that many women do not see superannuation, or the issues involved in financial literacy, as relevant to them. This can be for a number of inter-related reasons, including lower incomes, focus on immediate family needs and discomfort with the technical language used by the financial sector.7
To make financial education successful, there is a need to first increase awareness about the importance of financial education and planning for retirement. There is a lack of research about how financial education programs can be designed to meet the needs of consumers through different life-stages.
The term ‘retirement' can also have a different meaning to women than to men. This perception is shaped by men's greater attachment to the labour force and women's disproportionate participation in unpaid work (especially in the home). Attitudes about traditional gender roles may lead to women (and men) expecting that their partner will provide for them in their retirement and to not seeing a need to have an independent retirement savings strategy.
OECD research has found that some countries provide financial education in a variety of forms with the most frequently used tool being the internet. The research also found that the next most used method of financial education was through the provision of resources such as brochures and pamphlets followed by courses and seminars.8
In Victoria in 2005 a women's summit on Ageing with Financial Security delivered the following key findings:
- young women rely on family and friends for financial information; women in their late 20s rely on their husband/partner and family; and women over 55 rely on government departments and community organisations;
- information must be accessible to women who need it most and tailored to different age groups and lifestyles;
- information programs need to run out of multiple outlets in places that women congregate and be run by peer educators, i.e. women of the same background;
- research shows that women are more likely to value information accessed through seminars or from colleagues, family and friends;
- specific needs of marginalised women must be considered; and
- success stories and simple, personable, relevant language that relates to all women was considered the most effective way to provide financial information.
A Victorian Office of Women's Policy online consultation on financial security, held in 2005, found that:
- 40 per cent of respondents did not consider themselves to be financially secure;
- over 40 per cent of respondents stated that they did not know whether they would be financially secure in retirement, with 34 per cent stating that they would not be financially secure in retirement; and
- over one third of respondents rated their knowledge of finances (e.g. debt, taxes, investments, banking, super etc.) as average.