Why Women Have Lower Retirement Savings: The Australian Case

Abstract

This study provides empirical evidence of the gender gap in retirement savings trajectories using a large longitudinal Australian database. The persistent trend of retirement income policy over recent decades has been to place responsibility for retirement savings accumulation with the individual employee. These plans are fundamentally linked to employment conditions and individual choices, which shape retirement savings trajectories and outcomes. Australia has a mature compulsory system and thus provides insight for countries embarking on similar paths. This study shows that the gender gap in retirement savings is observable from early on in an individual’s paid working life and persists over time, providing evidence that women are disadvantaged early in their careers, with few signs of improvement. Men, in contrast, are overrepresented in the upper quartile of growth in retirement savings. This study provides important empirical evidence for policymakers concerned with gender differences in retirement outcomes.

KEYWORDS:

• Gender inequality
• pensions
• social policy

JEL Codes:

• D14
• D31
• D63

ACKNOWLEDGMENTS

We gratefully acknowledge Mercer Australia for the provision of data. We also acknowledge the support of David Knox in facilitating the data use and our understanding of it. This research was financially supported by the CSIRO-Monash Superannuation Research Cluster, a collaboration between the CSIRO, Monash University, Griffith University, the University of Western Australia, the University of Warwick, and stakeholders of the retirement system in the interest of better outcomes for all. We would also like to acknowledge the work of our colleague, the late Dr. Maria Strydom. Maria was a much loved and valued member of our research team, and we greatly miss her.

Notes

1 Superannuation savings can be accessed earlier depending on date of birth. The earliest is age 55 for those born before July 1, 1960 and increases to age 60 for those born on or after July 1, 1964. Withdrawals are only tax free from age 60.

2 However, the practical difference of the act has been questioned (Skinner, Hutchinson, and Pocock 2013).

3 For example, as Jennifer Baxter (2013) highlights, the employment rate for mothers has increased from 55 percent in 1991 to 65 percent in 2011, though disproportionately in part-time paid work.

4 For comparison, through 2012, which is the final year of our data, the AUD traded at a slight premium to the USD, and the AUD was worth approximately €0.80.

5 Unless a member joins on the first day of the financial year, their total contributions need to be annualized. Given that not all individuals are employed on the same frequency of contributions, extrapolating from a small number of observations can provide an inaccurate estimate, and we, therefore, use full financial years (July 1 to June 30) to avoid these issues.

Additional information

Funding

This work was supported by CSIRO-Monash Superannuation Research Cluster.

Notes on contributors

Jun Feng

Jun Feng is Lecturer at Monash University. He holds a PhD in Economics and an MPhil in Actuarial Studies from the University of New South Wales (UNSW). He specializes in population aging research with a focus on both the financial and physical security of aging. His research interests include household retirement savings, investment and consumption behavior, retirement income policy, disability and long term care for seniors, health literacy and cognitive skills and associated financial needs and outcomes.

Paul Gerrans

Paul Gerrans is Professor of Finance at The University of Western Australia. Paul’s research focuses on consumer financial decision making, particularly within a retirement savings context, and the role of financial literacy. This research has been aided by transaction databases provided by retirement savings funds. He has an interest in all aspects of financial literacy with an emphasis on the acquisition of financial literacy by young adults (for example, undergraduate students) and the interaction of financial literacy and cognitive decline among older adults. Paul is presently a member of the OECD/INFE Research Committee and the PISA Expert Group.

Carly Moulang

Carly Moulang is Senior Lecturer at Monash University. She holds a PhD in Accounting and a Graduate Diploma in Psychology from Monash University. Carly’s research interests are in the broad areas of psychological-based accounting research and behavioral finance and include topics related to retirement savings, gender issues, well-being, risk-taking, and the role of affect in decision making.

Noel Whiteside

Noel Whiteside is Emeritus Professor in Comparative Public Policy at the Institute for Employment Research, University of Warwick and Visiting Professor at the Smith School for the Economy and the Environment, University of Oxford (UK). She works on labor markets and labor market policies in historical and comparative perspectives, on projects funded by national and international research agencies, including the European Commission. Recent publications have focused largely on pension issues.

Maria Strydom

Maria Strydom (late) was Lecturer in the Department of Finance at the Monash Business School, Monash University.