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What the 2022 federal budget means for women’s superannuation

What the 2022 federal budget means for women’s superannuation

Last night’s federal budget included measures that aim to improve women’s participation in the workforce but missed the opportunity to narrow the gender super gap.

The 2022 budget revealed a proposed change to the Parental Leave Pay (PLP) and Dad and Partner Pay schemes in an effort to provide working families with increased flexibility to manage work and care.

Currently, under the PLP scheme, eligible primary carers of a newborn or newly adopted child can claim a payment for up to 18 weeks, while the Dad and Partner Pay scheme allows non-primary carers to claim a payment for up to two weeks.

The change announced in this year’s budget would enable a single parent to claim a full 20 weeks of paid leave, while couples can choose to split the 20 weeks PLP in whichever way suits them.

The government does not pay super on PLP, despite the growing gender super gap.

Industry super fund HESTA welcomed measures aimed at increasing women’s workforce participation but said the Federal Budget was a missed opportunity to improve women’s long-term financial security.

“Our super system has a persisting gender blind spot that sees women retire with almost a third less super than their male counterparts,” HESTA CEO Debby Blakey said.

“Eighty percent of HESTA members are women, and those who raise children continue to pay an unfair financial penalty through inadequate super balances, leaving too many vulnerable to poverty as they age.”

According to Ms Blakey, there are important reforms Australia’s next Government should deliver in its first term. These included paying super on Commonwealth paid parental leave and introducing a superannuation carer credit for new parents to help get their super balances back on track following unpaid parental leave.

Recent HESTA research revealed nine in 10 of the more than 2300 members surveyed strongly agreed that changes were needed in Australia’s super system to boost women’s financial security in retirement.

Additionally, almost eight in 10 members supported a super carer credit where the Government makes a super contribution to fill part of the super gap that arises during unpaid parental leave.

“Women predominately take on the primary caring role, making an enormous contribution to our economy and society through raising children,” Ms Blakey said.

“Our super system needs to recognise this by helping new parents get their retirement savings back on track, ensuring they’re not penalised with financial insecurity later in life.”

Sharing this sentiment, Industry Super Australia (ISA) Chief Executive Bernie Dean said: “This budget was another missed opportunity to narrow the gender super gap and it’s disappointing the government did not make a modest investment in the financial future of millions of mums and pay super on parental leave.”

“Working mums are going to keep falling behind until super is paid on parental leave,” he said.

“The unpaid super scourge is a $5 billion problem politicians are refusing to fix. It is the workers’ money – they should get it when they get their wages.”

According to ISA, paying super on PLP would add up to $14,000 to the retirement balance of a mother of two. As 99.5% of PLP applicants are women, paying super on Commonwealth parental leave would be a concrete step towards bridging the gender super gap.

To get the most out of your retirement nest egg, it's important to make a habit out of regularly comparing your super fund’s performance against that of others, to ensure it remains competitive. RateCity's superannuation comparison tables can help you get started.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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