Six ideas for protecting women's superannuation during life's hurdles: Mark Bouris

I have been astonished by the correspondence from women in the past few weeks, and one of the topics that has come up time and time again is how women’s retirement plans are derailed when they get divorced.

One of the changes for the better over the past 40 years has been equality for women. However, economic liberation hasn’t necessarily followed: women generally earn less than men doing the same job, they have much lower balances for superannuation and ‘no fault’ divorce – while empowering – generally leaves women at a financial disadvantage.

When married people retire, they generally share their superannuation savings. They also own the family home and other assets together, which means they share the security and yield from these assets.

This means the woman’s non-earning years of having kids and raising a family is covered in retirement by the partner.

But what happens to the women whose marriages don’t make it?

Think about this example. A couple gets married and decides to start a family. The man is earning $70,000 per year and the woman is earning $50,000 per year. The couple decides that the wife is going to take five years off to raise the kids and then she is going to work part-time for the next five years, earning say $30,000. Over that 10 year period, the husband will accumulate approximately $92,000 in super whilst the wife will only accumulate approximately $19,000 (based on 9% compulsory super contribution and a compounding rate of 5% pa for the ten year period).

And then they get divorced.

At present, the couple then will more than likely end up in the family law court fighting over who gets what. Often the situation leaves the wife high and dry in terms of super savings as the result of her raising the family.

This scenario is playing out all too often. But why?

The government and the financial services industry could be doing more to even the scales in this area, but ultimately women have to recognise this situation as a reality and they have to plan for it.

Here are a few ideas:

• Use the spouse contribution system and split all savings into super equally while both of you are working
• If you are earning $37,000 or less and want to contribute your own cash to super, the government will help you by putting in an additional 50% of what you contribute (up to $500)
• If divorcing, negotiate a fair share of the total pool of super
• Never leave the big picture finances to one partner. Share the responsibility, learn the ropes
• In the settlement, think twice before opting for the family home, especially if it comes with a big mortgage
• Get expert advice. Ask around and select an adviser who speaks to women, not down to them.

Good retirements are made, not fluked. And to get there, you need to take all possible scenarios into consideration – especially the negative ones. Understanding your situation and knowing what you need to do financially can be one less thing you have to worry about. Good luck.