Closing the super gap

It’s great to have flexibility at work — especially if you have a family to raise. But unless you take care, time you spend away from the office could see you facing a super gap when the time comes to retire.

In recent years, flexibility in the workplace has really taken off, as employers have responded to employees’ needs to find a balance between work and family life.

While this can give us more freedom now — to care for children, study or travel overseas — if we don’t take into account the super we’re missing out on, it could limit our freedom in retirement.

That’s why it’s important to tackle the super gap head on, says Deborah Wixted Executive Manager, Advice Strategy at Colonial First State.

“Ask people how much they’d like to live on in retirement and they typically say around 65 to 70% of their current income,” says Deborah Wixted, “To achieve that, you need to put at least 15% of your income into super during your working life.”

“Even if you work full time without taking extended time off, super guarantee alone is generally not enough to achieve this. And for women, the problem can be much worse.”

What is super guarantee (SG)

SG is the minimum amount that your employer must pay into your super fund. It is currently 9.25% of your gross salary.

Facing the super gap

Wixted says that, in the past, women have borne the brunt of the super gap — often well behind in savings when the time comes to retire.

“There are plenty of reasons women end up with less super,” says Wixted. First, there’s the simple fact that women still tend to earn less than men; 26% less, taking overtime into account, according to the Bureau of Statistics.1

Although women are often the worst affected by the super gap, they are by no means the only ones at risk. You can face a gap in your retirement savings if you work overseas for a few years, work part-time, or take time off work to recover from ill health. And business owners and independent contractors often don’t make it a priority to pay themselves super.

Then there’s time out for family. While working less can be great for the kids, it also means less super. And with more men taking time out to help raise a family, the gap can impact either parent. Wixted gives the example of Sam a 31 year old earning $80,000 a year, who takes five years off to raise a family. Unless he can close the gap, he’ll end up with a retirement income $11,781 a year less than someone with an uninterrupted career.

Luckily, Wixted says there’s a lot that can be done to close the gap. “Making a small additional contribution to super can make a bit difference over time,” she says.

For example, Sam could contribute just $150 a month as after-tax contributions into super from age 31 and save an extra $119,826 by 67; effectively closing the super gap.

Three ways to close the gap

1. Take control and round up your super and make sure you’re not paying extra fees.

2. Choose the right investment option for your age and stage of life

3. Top up your super through salary sacrifice or spouse contributions

Remember, super rules are complex and everyone’s situation is different, so it’s important to get advice before you act. To help devise a strategy that can help you boost your savings and close the super gap, speak with your financial adviser.


1 Australian Bureau of Statistics, Release 6302.0, Average Weekly Earnings, Australia, May 2013.

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