Home / SMSFs / Modelling shows early $20,000 ‘gift’ closes SMSF gender imbalance: Class

Modelling shows early $20,000 ‘gift’ closes SMSF gender imbalance: Class

The gender gap may be closing in SMSF balances (and at a much faster rate than APRA funds), but it's still a glacial pace. Class modelling shows that an early boost, combined with the magic of compounding, can redress the imbalance.

A $20,000 ‘gift’ from a parent or grandparent to a daughter or granddaughter early in their working lives could make “all the difference” to their financial security in retirement, Class general manager Jo Hurley told the SMSF Association 2024 National Conference in Brisbane this week.

Hurley said strategies to address the gender gap typically focussed on later life, and assume couples are still together and that they’re now able to make catch-up contributions.

“But that’s not necessarily the case,” she said. “I’ve seen a lot of women really disadvantaged by divorce later in their working lives where their plans to increase their superannuation contributions have come to naught. Having always thought they knew where their superannuation balance would land on retirement, they now realise that simply won’t be the case.

  • “In my opinion, the reality is that strategies to close the gender gap later in life don’t work. But if young women get a top-up payment early in their working lives, then it can make a real difference to closing the gender gap.

    “Based on our modelling, $20,000 put in superannuation early would close the gender gap. Although we’ve called it a ‘parental contribution’, we realise that the contribution must come from the member so it will involve a gift.”

    Hurley said a trend evident in Class’s data was revealing in how it demonstrated that it was the time women spent out of the workforce, having children and other enforced career breaks, that was the key determinant in the gender gap.

    “When you drill into the numbers, we found that gender gap for young people in their 20s favoured women, that they had more money than men in the early stages of their careers.

    “I got super excited when I saw these numbers as it was the first time such a trend had been identified,” Hurley continued. “When I began discussing it in my presentations, I got quite a few advisers asking, ‘How much do I have to contribute to my daughter’s super fund in her 20s to close the gender gap straight up, so she’s never going to have to worry about that again?’

    “That’s when we did the modelling and hit upon the $20,000 figure. Of course, like all modelling, there are assumptions built in, but we still believe it would make a significant difference in bridging the gender gap.”

    Hurley added that the modelling also showed that it was extremely difficult for women who have had disrupted careers to come from behind to catch up to where they want their superannuation balance to be on retirement.

    “To do that you’re really going to have to make significant salary sacrifices. It’s much better to address the issue when women are in their 20s and compound interest can work its magic,” she said.

    What gives Hurley’s comments greater resonance is the fact that although SMSFs outperform APRA-regulated funds in terms of closing the gender gap, the pace of change is still glacial, even in the SMSF sector.

    “What our figures show is that while the gap is closing from 15.5 per cent to 14.4 per cent (in APRA it can be anywhere between 22 per cent and 35 per cent), it’s still happening too slowly. It shows why later-life strategies aren’t working and why an early top-up is a possible solution.”

    Staff Writer

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