Location: International Womens Day > Media  » International Women's Day Address by Ms Ilana Atlas

International Women's Day Address by Ms Ilana Atlas

Great Hall, Parliament House


8 March 2007

“Helping women gain control of their financial futures’

Thank you Tracey.

It’s a pleasure to join you today.

And to be among so many women who have made a difference.  Women who are great advocates for change and wonderful role models and mentors, inspiring the next generation of women to make their mark.

In order to make their mark and realise their full potential, women today need to be in control of their lives.

Janet has talked about the importance of women taking control of their well-being and making small changes that will make a big difference to their health.

As with many of us, the woman who has had the most impact on me is my mother.  From as early as I can remember, she brainwashed me to be emotionally and financially independent.  Easy to say, hard to do!

I didn’t marry until I was 45 and had an interesting past before that – so my journey to emotional independence has been long and tortuous.  Fortunately, for me and you, we are not talking about that today.

However, being financially independent, being in control of our financial future is equally important - as my mother knows – and equally challenging.

It’s your financial future that I want to talk about today.  Because the situation is dire for many Australian women.

Research1 tells us that half of all female baby boomers aged 45 to 60 years have just $8,000 in superannuation.

And that women’s participation in superannuation is below men in all age groups – but most marked in those approaching retirement.2

There are many reasons for this – the time women take out of the workforce, their caring responsibilities for not only children, but increasingly, aged parents.  The financial setbacks along the way eg divorce and their general lower earning power.

We all have stories.  A senior executive colleague of mine (who works in a bank!) told me about his mother.  She recently became a widow – she had never written a cheque and could not withdraw money.

And there is the friend who had no understanding of the family finances and had to navigate a divorce.  She could not give instructions.

The harsh reality is that many women simply won’t have enough to retire on – particularly when you consider that they will live, on average, to 83.

Let me give you an example:

Let’s say you’re a 45 year old woman earning $85,000 a year, planning to retire at 55, with a life expectancy to age 80.

Can anyone guess how much you’d need to have a comfortable standard of living in retirement?

You will need $35,731 a year in after tax income to have a comfortable standard of living in retirement.3

We’ve made a number of assumptions4 in working up this scenario, which I won’t detail here, but we estimate you would need a balance of $937,400 in superannuation at 55 in order to provide the level of after tax income5for a comfortable retirement in the first year of retirement.

This is a huge gap for many women, a seemingly insurmountable task.

So for many women, there will be trade-offs in working longer and delaying retirement or reducing their standard of living in retirement. 

Can I take a straw poll?  How many of you have considered the level of income you will need on retirement and how much you will need to save to generate that income?

This is my message to you today:  This is not a hopeless case – there are clear financial strategies that we can pursue to close the retirement gap.

And more good news – women are slowly becoming more determined about being in control of their financial future.

My message is simple:  Take control.  The AFR editorial a few weeks ago said:

“The bulk of those who have 15 years or more until retirement will have few excuses if their superannuation savings are insufficient to keep them comfortable in old age.  Retirement savings are by and large an individual responsibility.  The government has done its part to make it easier by abolishing tax on super payouts for most people over 60, by making private pensions much more flexible and by previously introducing other benefits such as the special pensions that can be drawn from superannuation by those over 55 who to continue working.  It is now up to us.”

Women are less knowledgeable and less engaged about their financial future.

And I would suggest that this is more important than ever when you consider that women’s earning power is less.  Only 15% of Australians earning over $100,000 are women6.  They are in more need of financial advice because they have to make their money go further and work harder for them.

In 2005, we wanted to find out whether women had taken control of their financial futures in order to develop a program to plug any information gaps.

So we conducted research7with over 1,200 Australian women – and it revealed some interesting facts:

For instance, who do you think takes responsibility for the day-to-day finances like banking and paying bills?  In almost half of Australian households it’s women.  And when it comes to investment decisions, 60% of Australians share this responsibility between men and women.

And then the story becomes more divergent because we started to discover some interesting differences between women and men.

For example, women are more likely than men to look to professional sources of information while more men than women tend to rely on magazines and newspapers.

And if women value professional advice, what is important to them?  Like almost everything in our lives, it’s the relationship.  It is the key factor for women in making and taking advice.  So women want financial advisers who take the time to get to know their needs, closely followed by being knowledgeable about investments.  Value for money comes in at third place.

And we found that women are sorely in need of better financial information.

Almost half of the women we surveyed rated their knowledge of superannuation and investments poorly.  Only 4 in 10 women could correctly answer a simple question about the amount of compulsory superannuation guarantee contributions.

I asked earlier: how much do you think you need to live comfortably in retirement?

Westpac ASFA research estimates it’s $35,731 a year in after tax income for singles and $47,824 for couples8.

Almost a third of women have no idea how much they will need as an annual income in retirement.  And if you don’t know what the goal is, how can you go about reaching it?

So it’s no surprise that women are significantly less confident than men about their retirement.  And the closer women get to retirement, the further away it seems.  Because half of those closest to retirement expect to work past 60.

Women are potentially great investors

While women are less knowledgeable about their financial future, the good news is that once they decide to take control of their financial future, they are potentially great investors.  Because they look for a strong relationship with their advisers and act on their advice which means they can plan better for the long-term.  And they seem to make fewer mistakes than men; they behave better.

Let me explain what I mean.

Last year we released the findings of research9 into investors’ behaviour conducted with the University of Western Australia.  It was the largest research project of its kind in Australia, spanning over three decades and drawing on data from 850,000 of our investment clients.

When we think of investors, we assume they act rationally.  That they are cold, react in an unbiased way to new information, are dispassionate, not over-confident and understand the trade-off between risk and return.

But that couldn’t be wider of the mark.

Because we’ve forgotten that money and financial aspirations are an emotional business, driven by very human behaviour.  It produces what we call saints and sinners.

And guess what?  When it comes to investing, men are much more likely to behave badly than women, mainly because of their over confidence.

For examples, men tend to hold on to poor investments for far too long, because it’s sometimes hard to admit mistakes.

Men also tend to go their own way and trade much more frequently than women, sometimes up to 40% more.  And this churns up their performance through increased costs.

So what are some simple steps that women can take today to make a big difference to their financial future and a comfortable retirement?


Financial advisers

I want to spend just a few minutes on the importance of an objective financial adviser.

Last week, we ran a focus group and education session with eight Westpac women marketers, as part of a program to get some insights on their thoughts and feelings around superannuation and financial advice.

We had some interesting high level findings.

For instance, most of the women felt they were on track financially because they were focused on paying off the mortgage.

Yet only one had seen a financial planner and had a formal financial plan.

Nearly all of the women admitted to having that niggling worry that perhaps they could be doing something more, or at least doing things better or smarter.

And when we asked them why they didn’t act on this niggling worry and see a financial planner, the three comments were:

“I might get told what I should have done and how much better off I’d be if I’d done that.”

And

“A planner will try to push me outside my comfort zone and maybe recommend high risk investments or gearing.”

And the third and perhaps most resonant comment was, “I don’t want to have to sacrifice my lifestyle now, I’m already juggling”.

How many of us in this room feel like that?

We need to work hard to overcome this reluctance.  Financial planning is not about rear vision mirrors – it’s about good forward planning: where are you now and where do you want to be.  And the financial strategy that will help bridge that gap.

And sometimes, the gap may not be as big as you think it is.  The main thing is identifying what it is and then doing something about it.

And this last point is really important: it’s you who controls the financial planning process.  You don’t have to accept a strategy that you’re not comfortable with: the role of a planner is to provide you with options and an understanding of any trade-offs you may need to make.

And if you’re not comfortable with a financial planner, shop around until you find one that truly understands your needs and goals and who will work with you to find ways to help you get there.

Because as we all know, it’s hard to earn the dollars but all too easy to give them away.

Like anything in life, better information means better informed decisions and better returns.

Conclusion

So to return to where I began my remarks this afternoon, take control and don’t delay.  This may feel like going on a diet or going to the gym – it is and it isn’t.  You don’t need to do it as often, but you do need to do it.  And the upside is very significant.

As an employer of 27,000 people, 65% of them women, we know that the company that helps give women control over their lives will see more women stay.

That’s why we hold financial planning seminars to arm our women employees with the information they need to take control of their financial futures.

The choices we make on these fronts put us in control of not only our own future but often the wellbeing of our families.  As we tell women in our seminars: “a man is not a financial plan”.

We simply cannot rely on someone else to do it for us.

The one thing women tell us, particularly those approaching retirement, is that yes, they would have started sooner, but having said that, it’s never too late to make changes.  And once they see that these small changes can make a big difference to their lives in retirement, they are excited.

Because after all, every aspect of women’s lives is connected: work and family, health and wealth.

To those of you who have their retirement under control, I hope you have felt very self-satisfied in the last 10 minutes.  For the rest of us, we hold our own future in our own hands, so let’s make it a lot of fun.

Thank you.


[2,126 words, 16 mins]

References

1.  As quoted SMH article on Superannuation, University of Canberra’s National Centre for Social and Economic Modelling.
2.  ASFA 2004 National Conference and Super Expo, Why can’t a woman be more like a man – gender differences in retirement savings, 10-12 November 2004.
3.  Westpac ASFA Retirement Standard quoted in media release 28 February, 2007, Comfortable Lifestyle Single, 2007.
4.  Assumptions: And let’s also assume your salary and income required in retirement is indexed by 3% per annum and the 9% Superannuation Guarantee is payable on your salary.
Income in retirement is taxable until individual reaches age 60. Taxable income is eligible for 15% pension rebate
Income and growth on investment in accumulation phase are 5%pa and 3%pa respectively
Income on investment in retirement phase is 5%. No growth
Income on investment is franked at 70%
Capital gains tax is not payable as investments are carried over to retirement phase before realised
5.     $48,100 ($35,731 indexed)
6.  Roy Morgan data, Identifying opportunities in the WFP Customer Base, BT Research and Analytics, July 2006.
7.  BT Female Investor Poll, March 2005.
8.  Westpac ASFA Retirement Standard, 28 February 2007.
9.  BT/University of Western Australia, SAINTS OR SINNERS? Portrait of Australia’s Managed Funds Investors, February 15, 2006.