Super considerations for parental leave

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When you’re planning to start a family, there’s a lot to consider, from what colour the nursery will be to which schools your kids will attend. Of course, there are substantial financial considerations too, and for many families, paid maternity or parental leave plays an important role in their family planning and financial strategies.

Many people will receive paid parental leave from their employer and/or they may be eligible for the Commonwealth Paid Parental Leave scheme. However, most Australian working parents do not receive super payments while they’re on parental leave, as employers are not required by law to make these payments. Missing out on super during parental leave can have a big impact on the amount of retirement savings parents will have down the track.

Recent media coverage has highlighted the effects this lost super has on mothers in particular, and a number of organisations and industry bodies are campaigning for both the government and private companies to change their parental leave policies to include super payments.

Read on to find out how parental leave affects your super, and what you can do in the meantime to continue building your super balance.

Super and parental leave

Currently, under superannuation law, employers are not required to pay their employees superannuation when they take paid parental leave. If you go on holiday for a few weeks or take some time off when you’re sick, your employer still has to contribute to your super. But if you’re taking time out of the workforce to care for children, there’s no obligation for your employer to pay you super during your paid parental leave.

Some private companies will choose to pay super to employees on parental leave anyway—but Industry Super Australia estimates the number of employers currently doing this is less than 7%1. The federal government’s own Commonwealth Paid Parental Leave scheme also does not include a provision for super—meaning that the majority of Australian parents are missing out on super payments for anywhere from six to twelve months while they care for their children.

The years when most people start families also happen to be some of your prime salary earning years in the workforce, so not receiving super during this time can have a big impact on the amount of retirement savings you end up with in the future. In fact, Industry Super Australia estimates that missing out on super during maternity leave costs the average mother of two up to $14,000 in retirement savings2.

What this means for Australian women

While a lack of super payments on parental leave can affect parents of any gender, women are disproportionately affected by this situation. 99.5% of recipients of the government’s Commonwealth Paid Parental Leave Scheme are women, and only 0.5% are men3, meaning that the burden of lost super falls mainly on women.

Australian women are already earning, on average, 13.4% less than their male counterparts4 due to the gender pay gap, and the added complication of lost super from parental leave makes it even more difficult for women to grow their retirement balances at the same rate as men. The Australian Institute of Superannuation Trustees estimates that women retire with nearly 35% less super than men, with more than 80% of women retiring without sufficient savings to fund their intended retirement.

What can you do to make up for this gap in super?

Everyone, regardless of gender, should have equal opportunity to live out their later years in dignity. The burden of closing the gender wage gap shouldn’t fall only on women—it’s the responsibility of everyone to make sure that our social and economic systems support people of all genders to live comfortable lives in retirement.

Several industry bodies, such as Women in Super have launched campaigns to encourage both the federal government and private sector to include superannuation in their parental leave policies. It’s unclear if this legislation will change in the future, but in the meantime, there are several steps you can take to put your super in a good place while you’re on parental leave.

Consolidate your super

If you have worked multiple jobs in the past, been self-employed or freelanced, chances are you may have super in more than one fund. Each super fund has its own set of fees, so if you have multiple super accounts, you may be paying multiple sets of fees (and possibly insurance premiums) unnecessarily. Over time, these fees can chip away at your balance and reduce your overall retirement savings.

Consolidating your super into a single account5 allows you to stop paying unnecessary fees and take greater advantage of the benefits of compound returns over the course of your lifetime.

If you’re a Media Super member, you can consolidate your super easily online using the 'Find my super' tool in your online account.

Learn more about consolidating your super

Review your investment options

Your super is invested into a range of different assets and managed by your super fund over time to produce returns for its members. The mix of assets your super is invested in will depend on the investment options you selected when you set up your superannuation account. Many funds offer their members a choice of investments, ranging from pre-mixed options, to single-asset class options, and possibly direct investment.

Everyone’s investment needs are different, and it’s likely that your needs and preferences for investment will change throughout your lifetime. It’s a good idea to review your superannuation investment strategy from time-to-time to make sure it’s working in your favour and setting you up well for retirement.

If you’re a Media Super member, you can review your current investment options by logging in to your secure online account.

Learn more about choosing the right investment option for your needs

Make additional contributions

Making additional contributions is a great way to grow your super—especially if you’re not working, or working part-time. There are two types of additional contributions:

  • Before-tax (concessional) contributions; and
  • After-tax (non-concessional) contributions.

Before-tax contributions are made from your before-tax income, often through a salary sacrifice arrangement with your employer. Not all employers offer salary sacrifice, so it’s worth checking if this option is available to you.

Learn more about making before-tax contributions

After-tax contributions are made from your take-home pay. Depending on your financial situation, you may not be able to make after-tax contributions every month, but even the occasional contribution can make a big difference to your balance over time.

Learn more about making after-tax contributions

You can use the MoneySmart Contributions Calculator to see the difference additional contributions can make to your retirement balance over time. Our team can also help you work out a customised contribution strategy that will maximise your contributions to help your super balance grow faster.

Spousal contributions

Spousal contributions are a great way for one person in a couple to boost the other’s super, and can be especially helpful if one partner isn’t working or is earning a lower income. You can make spousal contributions if you’re married or in a de facto relationship, and your partner earns less than $40,000 per year. Depending on your partner’s income, you may be eligible for a tax offset if you make spousal contributions.

Learn more about spousal contributions

Check if your employer offers super payments during parental leave

While there’s no legislation requiring them to do so, some employers do offer super contributions to their employees who take parental leave. If you’re planning to take leave to care for your family, it’s worth asking your employer if you can be paid super during this time.

[1, 2, 3]Industry Super Australia, Report Reveals the $1.6 billion Super Sting on Australian Mums, Report reveals the $1.6 billion super sting on Australian mums

[4] Workplace Gender Equality Agency, Australia’s Gender Pay Gap Statistics 2021, Gender pay gap data

[5]Before making a decision to combine your superannuation, you should consider any costs, change to insurance cover or loss of benefits that may apply and, if necessary, consult a qualified financial adviser.

We’re here to help

Everyone’s financial situation is different, and some strategies for boosting your super might be more suitable for you than others. Our team is here to help you make the right choice for your needs.