media release
7 March 2023
In the lead up to International Women's Day, new independant modelling reveals Australian mums have missed out on more than $2.8 billion in super savings at retirement[1] from taking time out of the workforce to have children and will continue to forgo thousands of dollars more in retirement savings the longer reform is delayed to pay super on Commonwealth Parental Leave Pay.
Delaying paying super on paid parental leave would also significantly impact the future retirement savings of new mothers.
Modelling shows a delay for one year until 1 July 2024 would reduce the retirement savings of a typical HESTA member who has a child in the financial year 2024 by more than $6,000[2]. A further delay until 1 July 2025 would cost a HESTA member with two young children more than $12,700[3] in retirement savings.
HESTA CEO Debby Blakey said this inequity was contributing to the gender super gap and was unfair for new parents, especially women who were far more likely to take parental leave than men.
“Failing to pay super on parental leave pay has seen working mums unfairly miss out on billions of dollars in super, and this research shows they’ll keep losing thousands of dollars in retirement savings each year this important equity reform is delayed,” Ms Blakey said.
“Our super system is one of the world’s best but clear, persisting gaps remain where millions of Australians, mainly women, are still falling through the cracks and not getting the full benefits of super. For women this means they are still retiring with around a third less super than men.
“Extending the Super Guarantee to workers taking paid leave to care for children is an important policy that will help create a fairer retirement system for all Australians and is a key step towards addressing the gender super gap.”
Regardless of gender, 85% of HESTA members surveyed in 2022 supported paying super on parental leave, increasing to 91% for those under 35. Nine in 10 strongly agreed that changes to Australia’s super system were needed to improve women’s financial security in retirement.
Australia’s national Parental Leave Pay scheme was introduced on 1 January 2011 and is the only commonly taken form of paid leave yet to attract the Superannuation Guarantee.
“The Federal Government’s decision this week to cut back super tax concessions for super account balances over $3 million is an important sustainability measure, but it is critically important that the Government acts now to ensure these savings help deliver a fairer and more equitable super system.
“That’s why we’re calling on the Government to prioritise paying super on the Commonwealth Parental Leave Pay scheme and other important equity measures. Not paying super on parental leave pay sends a message that unpaid caring work is undervalued when in reality this work is indispensable to our economy and the wellbeing of families,” Ms Blakey said.
“Nearly 80% of our members are women who work mainly in caring roles that are typically lower paid such as aged care and early childhood education. They shouldn’t be financially penalised at retirement after spending their lives looking after others.”
As well as paying super on Commonwealth Parental Leave Pay as a key priority, HESTA in its submission to the 2023-24 Federal Budget has also sought reform to the Low Income Super Tax Offset, other tax concessions and a super carer’s credit for unpaid parental leave.
Modelling prepared by HESTA and its analytics partner Laneway Analytics made the following assumptions: Retirement Age 67, AWOTE: 3%, CPI 3%, Investment return 6.5%, 32 weeks’ time away from workforce per child, Paid Parental Leave to increase to 26 weeks as legislated, SG rate to increase to 12% as legislated.
Ends.
[1] Modelling by Laneway Analytics estimated the benefit to Australian women as of 31 December 2022 if superannuation had been paid as part of the Commonwealth Parental Leave Pay since it was introduced 1 January 2011.
[2] Modelling by Laneway Analytics estimated the impact of delaying the introduction of super on Paid Parental Leave on the retirement savings of a range of sample HESTA members.
[3] HESTA member is 29 years of age and would have a child in both financial years 2024 and 2025.