Australia’s mothers are missing out on as much as $14,000 in superannuation savings due to the structure of the paid parental leave scheme, with super funds now calling on the system to be overhauled.
Paid parental leave is one of the few types of paid leave that doesn’t accrue superannuation payments, and it’s a problem that has affected around 1.45 million mums, according to estimates by Industry Super Australia (ISA).
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However, ISA analysis also found that 68 per cent of Australians believe superannuation is paid with parental leave. And when these Australians are informed that this isn’t the case, they “overwhelmingly” believe the system needs to change.
Australian women currently retire with around one third - or around $67,000 - less in super than their male counterparts, and ISA believes that paying super on parental leave would be one major step towards shutting this gap.
In its new report, Paying Super on Parental Leave, ISA finds that failure to pay superannuation on paid parental leave would cost a mother of two $14,000 by the time she retires, while a mother of one would be $7,000 better off.
As it stands, women make up 99.5 per cent of the Commonwealth Parental Leave Pay applicants.
“In Australia today far too many women and men do not have access to paid parental leave which includes superannuation payments – this is having a detrimental financial impact on families, especially women, and is impeding our country’s economic growth,” former Workplace Gender Equality Agency director Libby Lyons said while releasing the report.
“We must stop penalising Australian women and men for having children”
The ISA analysis found that paying superannuation in line with the minimum wage rate to people using the federal paid parental leave scheme would cost $230 million a year.
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However, it predicts that some of these costs would be recouped through an increase in superannuation taxes and mothers’ reduced dependence on the Age Pension in the future.
“Unless the Federal Government acts, millions of women will continue to pay a price for taking time out of the paid workforce to raise a family, missing out on super and ending up with thousands less at retirement,” ISA advocacy director Georgia Brumby said.
ISA also called on state and territory governments to pay employees superannuation on parental leave, claiming that as major employers, they can exercise considerable influence.
It estimates that at least 400,000 people employed by state and territory governments are missing out on super when they go on parental leave.
“This is an opportunity for the Prime Minister and governments of all levels to lead the way and ensure super is paid on parental leave,” Brumby said.
“Otherwise, we’ll continue to see too many women retire into poverty.”
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