Praise for plan to pay super on paid parental leave

Aware Super

The Commonwealth Government’s commitment to pay superannuation on paid parental leave is a watershed moment for Australia’s parental leave and retirement savings schemes, according to a leading super fund.

Aware Super’s Chief Executive Officer, Deanne Stewart, said the fund applauded the Government’s commitment to pay super on the Paid Parental Leave (PPL) scheme.

“Paying superannuation guarantee contributions on paid parental leave has long been a sensible, responsible step to take to help close Australia’s national gender pay gap – and improve retirement outcomes for women. Paying super during parental leave will make a material contribution to closing the gender retirement gap, which today sees women retiring with around 25 per cent less super than men.”

In March, the Government announced its plan for super to be paid on PPL from 1 July 2025, with further details to be announced in the Federal Budget this May.

Modelling by Aware Super indicates that a woman on a low income with two children, accessing 26 weeks of Commonwealth Paid Parental Leave, would be $10,700 better off at retirement. Based on this modelling, due to the compounding of investment returns, the benefit to each individual would be more than twice the cost of making the payment.

There is currently no requirement for employers to pay superannuation on parental leave, however 86 per cent of employers who offer paid parental leave to staff also pay super on those payments, according to data from the Workplace Gender Equality Agency.

“We congratulate Senator Katy Gallagher and the Commonwealth Government on this historic enhancement to both Australia’s parental leave and retirement savings schemes,” Ms Stewart said. “But we all know that this is not a problem that government can solve on its own, and it’s time more of our nation’s employers followed the Government’s lead on this important initiative.”

Employer-paid parental leave is the only form of paid leave that does not attract superannuation payments.

Currently, 13 per cent of employers pay superannuation on unpaid parental leave, however this could also make a material difference to retirement outcomes. Aware Super’s modelling indicates that primary teachers aged 30 who took 18 months of parental leave could have an additional $26,000 in their super balances at retirement if super was paid on the unpaid portion of the leave.

This benefit is almost three times the cost to the employer of paying the super guarantee during this period, due to the compounding of investment returns.