Smashed nest egg: Super is not just a women’s problem
Blokes are not super proof
Let’s be very clear about this – superannuation, or lack there of, is not a women’s problem.
If you are facing a divorce low superannuation balances are just as much as a problem for men, perhaps more so if they don’t realise just what is at stake.
There’s a lot of talk currently around low superannuation balances and working mothers. Superannuation inequity does apply more generally to all women thanks to a still existing and historic gender pay gap but stepping out of the workforce for a period of time is still the most likely thing to put a big dent in a woman’s super.
Anything from three months to a full year’s maternity leave has a significant impact, that is then compounded by returning to work in a part-time capacity, then the likelihood of a second period of maternity leave, more part-time work and so on.
It’s even more dramatic if the new mother chooses to stay home and be a full-time parent and homemaker.
And it’s compounded again and again for the next 30-odd years because super works best as a long-term investment so the smaller the capital, the smaller the growth.
But it’s not a women’s issue. At least, its a couple’s issue, at best, if men don’t understand that, and the significance of protections that currently exist for stay-at-home mums, then it’s absolutely front-and-centre a men’s issue.
Under Australian Family Law if you are in a relationship, either by being married or (soon – hallelujah!) in a de facto relationship, in very simple terms, all the superannuation either of you earn throughout your working life is part of your joint asset pool.
That means you are each equally entitled to what is there.
It doesn’t matter if the superannuation is put into a joint account, as is currently being touted in some circles, or whether it is in individual names in individual accounts. Superannuation is shared as much as the marital home or the bank balance.
Again, we are talking about families where one person – in the majority of cases still, that’s the mother – steps out of the workforce to raise children. One of the things that establishes that a de facto relationship exists is the fact that there are children of that relationship.
Single people, or those who do not have children and who continue to work throughout their lives are likely to have the same level of superannuation, regardless of gender. Ignoring investment decisions and the gender pay gap – which is a valid yet separate discussion – it’s a relatively level playing field.
If a mother stays home to look after her children her superannuation contributions stop. But while a father’s contributions will continue for as long as he is employed – his future superannuation balance will also drop significantly.
Say a couple works equally throughout their lives and each establishes a superannuation account of $300,000. When they retire they have $600,000. If they divorce they effectively get $300,000 each.
If one of them has a higher-paid job throughout the relationship and one accumulates $400,000, while the other accumulates $200,000 – the figures are the same; $600,000 to share and if they divorce it’s split.
In the example of a stay-at-home mum, it is not unusual to see clients who have been married for 15-20 years and the husband has around $300,000+ in super but the wife who has stayed home has $20,000. If there has been a period of separation before a financial settlement the weaker financial party may have even drawn down on that low balance further, as allowed under financial hardship provisions in their policy.
That’s $320,000 total – or $160,000 each.
The Family Law Act endeavours to be as just and equitable as it is possible for a piece of legislation that is to be interpreted in individual cases can be. There are provisions to compensate a party who has been out of the workforce for a considerable period of time, or who may have limited prospects upon their return to work, in the way their property settlement is apportioned. Particularly if one party continues to be stably employed and well paid.
When considering the future needs of the parties consideration is also given to financial resources which can include superannuation.
So again in the above example, taking into account all of the other circumstances of the matter, one option may be that the wife takes the bulk of the super – on the basis that the husband is better able to re-establish a balance over the rest of his working life.
If the couple stays together they are simply generally worse off in retirement than couples who have contributed superannuation entitlements from two full-time working careers.
If they divorce there is the likelihood a working father’s super will take a big hit – and a possibility the majority of it could end up in an account held by his stay-at-home ex. She has been protected in her future interest, as much as possible as the existing asset pool allows, under Family Law.
In that instance a man might be just as likely in the current conversation about superannuation inequity to stand up and say, whoah there, hang on. And maybe when we realise the blokes are possibly less super proof than the women, a workable answer may suddenly present itself.
This article appeared in The West Australian, Your Money on 3 December 2018.
Susan Hewitt is the Principal at Bright Side Family Law, a non-litigious family law and mediation practice. Susan has worked as a lawyer and journalist for almost 30 years. She is an accredited collaborative lawyer and family-law mediator who is committed to helping families through their relationship breakdown in an honest, cooperative and respectful manner.
If you are facing a family law matter call or email Bright Side https://brightsidefamilylaw.com.au/contact-us/