Women’s superannuation slumber hurts returns

We talk so much about the superannuation savings gap that affects women, but seldom do we ever look at where the majority of women are actually invested and ask, could we be doing better?

This week I decided enough was enough and analysed the top ten balanced funds, where most Australians are invested, and correlated that to the top ten balanced funds with the highest female membership, to see if there was a match. There was but it wasn’t great.

What I discovered was that millions of women are missing out on thousands of dollars in investment earnings because they are not engaged enough to change to the best performing funds.

https://youtu.be/FVa-58CldkE

Super fund performance matters for everyone but particularly women because they retire with 30 per cent less on average than men, according to The Australian Bureau of Statistics.

Data supplied by SuperRatings shows that of the top ten performing balanced indexed super funds over the past ten years, only four are also in the top ten for having the highest female membership.

This means that some 3.2 million women in the six funds with the highest female membership are missing out on superior returns, notwithstanding many more who are in smaller funds.

Adding to the gender gap in super savings is the fact there are also more men in the top performing funds.

This is despite REST being the top performing fund over the decade. It represents largely retail workers, of which 60 per cent or 1.78 million are women.

The REST Core Strategy Fund returned 6.1 per cent per annum in the ten years to May 31, 2017 compared to a median return of 4.9 per cent.

SuperRatings research manager Kirby Rappell says the percentage difference in returns can equate to thousands of dollars.

“Assuming a $50,000 starting balance and excluding the impact of any contributions during the period, the REST Core Strategy, would have provided $6,335 more over a decade than the median balanced fund.

“The gap between the best and worst balanced fund is more stark, with this difference being $24,655 over the decade,” he said.

The average super balance for women when they retire is around $150,000 less than the average for men, according to the Association of Superannuation Funds of Australia (ASFA).

Average super balances at retirement today are $138,150 for women compared to $292,500 for men.

AustralianSuper Balanced, HOSTPLUS Balanced and UniSuper Accumulation Balanced are among the top performing funds with the highest female membership.

Together they have returned around 6 per cent per annum for around 1.6 million women over the past decade.

The country’s biggest super fund AustralianSuper represents only 39 per cent women compared to 61 per cent men.

The data used in the SuperRatings top ten balanced indexed funds was examined because it is the type of investment option where most Australians are invested. It reflects a mix of 60/70 growth assets.

Of the ten funds with the highest percentage of women, MyLife MyMoney fund by Catholic Super, was the only one to rank among the top ten best performing balanced funds by SuperRatings.

This fund consists of 71 per cent women and returned 5.5 per cent per annum over the past ten years.

The funds with around 80 per cent female members include Guild Retirement Fund, QIEC Super, HESTA Super fund and Australian Catholic Superannuation fund.

Performance data is not available for all of these funds due to them being new funds with the exception of HESTA and Australian Catholic Superannuation which returned 5.4 per cent and 3.5 per cent respectively over the past ten years.

Over the past eight years most superannuation funds have posted positive returns.

In the financial year to May 31, the median growth fund returned 10.5 per cent according to research company Chant West.

Research shows that women and men are more likely to opt for the default super product recommended by their employer or industry they work in.

For instance HESTA focuses on health workers and particularly nurses, which are predominately women, while MTAA Super which services the motor trades industry has a high percentage of men as members.

Career breaks to have children and working in part time jobs or positions that either don’t pay well or super at all, are commonly cited as reasons why women tend to retire in less than men.

This is why there is such a focus on the need for women to also do more improve the retirement savings gender gap by making better investment decisions.