Parents accessing the government-funded paid parental leave (PPL) scheme will soon be offered superannuation, but the change isn't set to come into place until the middle of next year.
Under the current program, a couple with a newborn or newly adopted child can access up to 20 weeks of paid parental leave at the national minimum wage. That figure will continue to rise until it reaches 26 weeks by July 2026.
There have been ongoing calls for super to be offered on government PPL to ensure women don't fall behind in their retirement savings.
The suggestion was most recently made by the women's economic equality task force, which was asked by the government to recommend ways to improve the financial position of women.
Ahead of the 2019 election, Labor committed to including super on government PPL but at the last federal election the party ditched the proposal, citing costs.
Finance Minister Katy Gallagher has confirmed the government plans to introduce legislation to ensure that super on the payments will be introduced from July 2025.
The data is clear, when women take time out of the workforce to raise children it impacts their retirement incomes with women retiring, on average, with about 25 per cent less super than men, she said.
Paying super on government parental leave is an important investment to help close the super gap and to make decisions about balancing care and work easier for women.
The Coalition said it supported the policy in principle but would examine the details of the proposal before making a final decision.
[This] is not a blank cheque, shadow ministers Sussan Ley, Angus Taylor and Michael Sukkar said in a statement. We will need to ensure support is targeted and goes to those who need it, not people who already have high balances. The trio called on the government to release the budget cost of the policy.
Cost to the budget
Under Labor's plan, super would be paid at 12 per cent of the PPL rate, which is based on the national minimum wage of $882.75 per week.
From July next year, the number of weeks offered to parents increases to 24 weeks. Super would be paid across all those weeks, with the money placed into a person's nominated super account.
The cost to the budget is not yet known. But according to a review commissioned by the former government, if super was paid on PPL payments, it would cost about $200 million annually.
That figure was based on 178,000 people accessing 18 weeks of government PPL each year.
The latest data shows around 180,000 families access the government PPL payments each year.
Based on 180,000 families accessing the scheme per year at a rate of 24 weeks from July 2025, the cost is likely to be about half a billion dollars in 2025-26.
Senator Gallagher would not reveal the cost on Thursday, saying only that it would be higher than Labor's original costings.
I'm not pretending it [isn't] a significant investment that we're making today, but we think it's worth it, she said.
We've found room to pay for it. And we think it sends a strong message about the value that we place on women.
Implications for retirees
A Treasury review of retirement incomes in 2020 found the main reason there was a gender gap in retirement incomes was because women earned less than men over their careers, which flowed through to their super.
Last year, the women's economic equality task force said this reflected women's accumulated economic disadvantages.
Women [work] in lower paid roles and industries, and therefore have an increased likelihood of taking on part-time or casual employment.
They are also taking career breaks to care for others, face discrimination and harassment in the workforce, and are more likely to experience family and domestic violence.
When a number of these factors occur throughout a working life, as they often do for women with children, the lower earnings accumulate.
But while Treasury agreed the lack of super on PPL made the gap worse, it said this contribution was small.
In 2021, the Grattan Institute calculated how much extra women could get in retirement if they were paid super on PPL.
It found that a woman who took two 18-week stints of leave in her early thirties would get an extra $356 a year in retirement if she was a high-income earner.
A low earner would get an extra $164 a year, and an average earner just $73 a year.
The reason for the difference is due to Age Pension eligibility.
PPL recipients would get paid the same amount of super regardless of their income, but the higher super balances would see middle- and low-earners lose some of their Age Pension.
https://www.abc.net.au/news/2024-03-07/retirement-savings-set-to-be-boosted-for-new-parents/103553762
