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Risk aversion is costing women in retirement

Longevity risk is well known. Australians are getting older and living longer. Recent data released by the Australian Bureau of Statistics confirms that Australia is the latest member of the so-called ‘Longevity 4’ club of countries where the average life expectancy for both men and women is 80 years and over. The other countries are Switzerland, Japan and Iceland and they face similar challenges to Australia – how to cater for longevity risk?

This is a good problem to have with the average life expectancy for an Australian male now 80 years and 84 years for an Australian woman. However, this also brings with it the question of how to provide for an adequate retirement.

Making better investment decisions

One way to help fight longevity risk is to make smart investment choices during working life and prior to retirement. This is vital to ensure the accumulation of sufficient funds in and outside of superannuation. However it also comes down to income, savings and behavioural biases. Our latest research into Australian investors’ equity preferences in collaboration with the University of Western Australia Business School paints a picture of falling equity preferences amongst Australians, which is crucial for accumulating sufficient funds for retirement.

The research examined investors’ overall moves in and out of equity-based managed funds and switches between asset classes. While there are some increases in SMSF balances amongst younger investors and a move to investment property and global equities, the research indicates that investors aged between 35 and 49 years of age have a low preference for equities. They are at risk of not meeting retirement objectives unless changes are made. It also highlights a large difference between men and women’s overall equity preference which commenced during the GFC and has been maintained since.

Gender bias in taking equity risk

Given this lower bias to investing in growth assets, women in particular are more at risk of not meeting their retirement objectives and managing longevity risk than men. Looking at a range of facts, it is easy to see why women are more likely to outlive their retirement savings:

  • Women earn less, with the average wage for males $72,779 compared with $49,834 for women.
  • Women often have broken work patterns usually for family reasons
  • Women retire with an average super balance of $68,600 compared to $112,000 for Australian males
  • Women live far longer, on average, than men.

Combining these factors creates the perfect storm for female Australians and their ability to save and secure a good standard of living in retirement, despite younger women having higher education qualifications.

Gen-Y women catching up

According to the CFSGAM Investor Insights research, Australian Gen-X women (35-49 years old) remain most at risk of not meeting their retirement objectives. It appears that women’s attitude to equities has been negatively affected by the GFC and hasn’t recovered since despite the improved returns, low deposit rates and improved labour market conditions.

Not all is lost. Younger Australian females are showing similar risk appetites to Gen-Y males, which is a unique parallel in our research. Over the last couple of years their equity preference has risen, in line with Gen-X males.

Overall, older women do appear to be less confident in their ability to manage money, less comfortable with their financial situation and more conservative in their approaches to managing money. One approach doesn’t fit all, but as an industry, there is still a lot of work to be done to help women improve their financial literacy and confidence to invest in growth assets to meet their retirement needs and cater for their longer life expectancy.


Belinda Allen is a Senior Analyst, Economic and Market Research at Colonial First State Global Asset Management (CFSGAM).


Rosalie Degabriele
June 22, 2015

Clearly it is not sufficient for women to rely on their spouse's super - the situation requires a broad review of a number of aspects across tax and superannuation which would work to give women equality in pay rates and in the super system and make allowances for broken service. Some women may be more conservative but this is usually related to child bearing and their lower pay rates.
Given that one half of graduates are now women we cannot assume that they do not understand risk and return rather the conservatism factor is more related to social factors which men are not necessarily bound by.

I am for a look at the entirety of superannuation for women which looks at all the contributing factors and creates a fair distribution of wealth.

June 21, 2015

I nearly always recommend that the working partner use super splitting to move 50% or more of their contributions to partner raising the children. This way the carer's super does not fall behind and this helps in some way to avoid a common problem with divorces where the carer looks to keep the home while the partner walks away with the liquidity.

Women in general may be less confident with equities but when they seek advice they are excellent at taking recommendations, implementing suitable portfolios and sticking to a plan, often exceeding savings targets. So maybe more education from earlier on would go some way to address this issue.

Maurice Goodings
June 20, 2015

My observation from living in a retirement village is that most superannuation finishes up in the hands of women. Even up to that point, superannuation is an asset shared between husband and wife.

Andrew Wakeling
June 19, 2015

It isn't a question of women being married or not. The issue is whether women have children in a joint venture and take the major load in managing home and family. Hopefully adults partnering for procreation will be encouraged to develop clearer and more formal contracts between them which will include provision for retirement. The standard words of the marriage service may sound good but they are no longer adequate.

Sam Naidu
June 19, 2015

What about introducing "family concessional cap" where husband can contribute super on behalf of the wife and the contribution taxed at 15%!

Phil Kneale
June 19, 2015

The flaw with all gender-related analysis of superannuation is the false assumption that no-one shares their superannuation with their spouse. I think the false assumption persists because it makes the analysis easier and it also allows the gender victimhood narrative to flourish (which often seems to be the purpose of such exercises). According to every such analysis I have seen, my wife is destined for destitution because of her paltry superannuation balance. However, that's not the case because the reality is that all of our financial assets are shared. I may be a bit old-fashioned but surely we aren't the only family that still works that way.

June 19, 2015

The necessity to achieve equal superannuation balances is open to challenge. This research does not distinguish between married / partnered women and single women. The outcome for married / partnered women needs to be considered in the context of their household structure. Even if they separate they have some claim to their partner's super

Bruce Gregor
June 19, 2015


Well made points re generations in the workforce and need for equities. But return uplift can only go so far. The flaw in our superannuation system is that it does not begin with the end in mind. If it did, we would have compensation through the tax system for higher invested contribution for women because they live longer and on average only gain 25% of their working life at full time employment. Also spare a thought for first wave baby boomer women who retired after 2006 thinking they would have part age pension and now face having their retirement income cut from 2017 by up to 20%. Hard to make up form this with a shift to equities right now. If there was a genuine rethink of the end purpose of superannuation, we might give some attention to these issues rather than the flawed notion of "tax expenditures''.



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