The Australian Government has committed to incorporating superannuation into the government-funded Paid Parental Leave (PPL) scheme if it is victorious at the next election.
Superannuation pay gap
There has been a lot of talk about the gender pay gap but the gender super gap is just as troubling.
The government’s initiative, which would be implemented from July 2025, would go some way towards mitigating the retirement savings gap incurred by women as a result of career breaks for child-rearing.
The current PPL program provides eligible parents with up to 20 weeks of leave, compensated at the national minimum wage. There are already plans in place to extend this period to 26 weeks by July 2026.
The latest adjustment responds to longstanding advocacy for the inclusion of superannuation in PPL, highlighting concerns over the financial disparity women approaching retirement – the fastest-growing homeless demographic – face in comparison to men.
Disproportionate impact of parenting
Finance Minister Katy Gallagher underscored the policy's intention to bridge the superannuation gap, emphasising the disproportionate impact raising children has on women's retirement savings.
"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," Gallagher said.
The government's plan entails a superannuation contribution at 12% of the PPL rate, aligning with the national minimum wage.
While the exact budgetary implications remain undisclosed, preliminary estimates suggest a significant investment, with costs anticipated to escalate from initial projections.
This policy shift has rekindled discussions on gender disparities in retirement savings, with some attributing the gap primarily to differential lifetime earnings between genders.
The Treasury's 2020 Retirement Incomes Review and the Women's Economic Equality Task Force have both highlighted the compounded economic disadvantages women face, including lower-paid roles, part-time or casual employment and career interruptions for caregiving.
Every bit helps
Although there was acknowledgment that the lack of superannuation on PPL payments exacerbates the retirement income gap, its overall contribution was deemed minor.
And yet, analysis by the Grattan Institute reveals that even modest superannuation contributions during PPL can significantly augment women's retirement incomes, particularly for low and average earners, due to the interplay with age pension eligibility.
The proposal has ignited a conversation about the valuation of caregiving roles and the structural reforms needed to ensure financial security for women.
As the election approaches, it will be interesting to hear from the opposition on this critical issue, which has implications for gender equality and economic justice – themes that wrongfooted the Coalition at the last election.