Having a family can create a ‘Super Baby Debt’ for mothers of up to $50,000 by the time they reach retirement new research has found. 1
The debt occurs when women suspend their normal superannuation contributions when they take two or more years out of the workforce to have children.
Over the life of their careers this can leave mothers up to $50,000 further behind men in the quest to ensure a comfortable retirement.
To overcome this problem, women should adopt ‘The One Per Cent Rule’ by adding an extra 1 per cent to their superannuation contributions for the rest of their working lives.
The financial drain on women is enormous, with almost 300,000 babies born in Australia every year, and many employed mothers taking time out of the workforce in the first 12 months after birth.
Suncorp Life Head of Superannuation Vicki Doyle joined Association of Superannuation Funds of Australia CEO Pauline Vamos in proposing that women should understand they have options when it comes to improving their retirement lifestyles and that Government had a role to play.
“The ‘Super Baby Debt’ can really eat away at a woman’s nest egg, but women have the power to overcome it by following ‘The One Per Cent Rule’,” Ms Doyle said.
“The Rule is that, for every two years out of the workforce, women need to make an additional 1 per cent contribution for the rest of their working life.” 2
Scenario based on a woman, 32-years-old, two years out of the workforce (see footnote).
Contributing to the issue is the continued confusion, apathy and frustration felt by women as surveyed through the Suncorp-ASFA Super Attitudes Survey 2012.
Findings show women feel the superannuation system is overly complicated and alienates them from their retirement planning, with:
- One in five feeling ‘ashamed’ or ‘dumb’ when it comes to knowledge of superannuation;
- 63% worrying they might be financially exposed upon retirement;
- And two in five feeling powerless when it came to their superannuation.
Coupled with that, over the last 12 months only 9% of people surveyed had increased their super contribution and only 7% of those were women.
Industry research shows that the critical contributor to the retirement savings gap is time spent out of the workforce as women take leave following the birth of a child.
Ms Vamos said self-education was essential: “There is a lot of information on fund websites and consumer sites like SuperGuru.com.au that women can access, but having a rule of thumb like ‘The One Per Cent Rule’ is helpful.”
In terms of Government action Ms Vamos said, “It is time to ignite the debate on a Federal Government funded superannuation scheme to cover maternity leave.
“Almost 300,000 babies are born in Australia each year and paid superannuation for maternity leave will help narrow the retirement savings gap and go some way to reducing the frustration felt by many.”
In addition to following ‘The One Per Cent Rule’, women can readily access advice by phoning super funds where experts are on hand to demystify superannuation for consumers, or see a financial adviser.
Ms Doyle said, “As a mother of young children, I really relate to this simple solution that women can readily adopt.
“Women do not need to feel ashamed or dumb, and The One Per Cent Rule gives women a good starting point for thinking about their super savings in general.”
1 Calculated using the Super Guru Retirement Projector based on comparisons on three scenarios of a woman 32 years old, two years out of the workforce at salaries as follows: a) $65,000 salary (super baby debt $28,000); b) $85,000 salary (super baby debt $36,500); c) $115,000 salary (super baby debt $50,000) compared to a woman 32 year old, same salaries and super balances, and no time out of the workforce.
2 Assumes parental leave is taken from ages 32-33 and retirement at 65.
For media inquiries, please contact:
Adam Connolly, 0417 170 084
Pauline Vamos, CEO, 0433 169 342
Rebecca Glenn, GM Marketing and Communications, 0416 170 439
Megan McDougall, Media and Communications Coordinator, (02) 8079 0849
This information is current as at August 2012 and may be subject to change. This information is general advice and doesn't take into account a person's objectives, financial situation or needs. A person should consider the appropriateness of the advice and the Product Disclosure Statement (PDS) before making any decision about acquiring or purchasing a financial product.
Suncorp Group includes leading general insurance, banking, life insurance, superannuation and investment brands in Australia and New Zealand. The Group has around 16,000 employees and relationships with nine million customers. It is a Top 25 ASX listed company with over $95 billion in assets. Suncorp has five core businesses: Personal Insurance; Commercial Insurance; Vero New Zealand; Suncorp Bank and Suncorp Life. Suncorp Life is a trans-Tasman life insurance and superannuation provider, selling our products and services through Asteron Life to independent financial advisers and direct to new and existing customers of the Suncorp Group through Group brands: Suncorp Bank, Suncorp Insurance, AAMI, Apia, GIO and AA Life in New Zealand.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation whose aim is to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice. ASFA’s focus is on whole of system issues and its core strategies are aimed at encouraging industry best practice, advocating for a system that plays a productive role in the Australian economy, and ensuring the industry delivers on its primary purpose of delivering decent retirement incomes. Our membership - which includes superannuation funds from the corporate, industry, retail and public sectors, and, through its service provider membership, self-managed and small APRA funds - represents over 90 per cent of Australians with superannuation.