Parental leave extensions fail to fix ‘super’ problem

Although the government looks to extend its parental leave program, mothers will still be left with less financial security in retirement, says CPA Australia.

Women suffer less financial security in retirement because paid parental leave lacks a superannuation entitlement and proposed extensions to the system - to 20 weeks in July 2023 and up to 26 weeks in 2026 - fail to fix the issue. 

“Women retire with lower superannuation balances than men and have less financial security in retirement,” said Dr Rennie. 

“Taking time out of the workforce to raise children unfairly exacerbates the gender super gap, as mothers are overwhelmingly more likely to take on the responsibility of childcare.” 

“The Retirement Income Review found paying super on parental leave would help reduce the gap between men and women’s super balances.” 

HESTA CEO Debby Blakey said the upcoming budget was a chance for the government to address the “motherhood penalty”.

“Every dollar our members can add to their super counts. That’s why the federal budget is a key opportunity to make real progress on boosting women’s financial security in retirement,” said Ms Blakey. 

“Our super system is one of the world’s best, but gaps remain that overwhelmingly disadvantage women.”Treasurer Jim Chalmers has previously acknowledged the problem.

“We all see those quite shocking gender disparities at retirement, and we will fund the super guarantee on paid parental leave when the budget circumstances permit that,” said Dr Chalmers at a roundtable hosted by the Australian Financial Review in August 2022. 

Ms Blakey said the budget should prioritise paying super on parental leave as this was a key equity measure for the retirement system.

“It’s not just about the dollars, failing to pay super on parental leave pay sends a clear message to women that unpaid caring work continues to be undervalued in our society.” 

“This is a critical year for super to address longstanding inequities that overwhelmingly impact women, as they shouldn’t be financially penalised after spending their lives caring for others.”

The renewed call for superannuation to be paid on parental leave comes as the government looks to legislate a change to the system which would see parental leave pay and dad and partner pay combined into one payment from 1 July 2023. 

As part of the reform, total paid parental leave would increase to 20 weeks and then by two weeks each July until 2026, when it reached 26 weeks. 

The legislation would mean parents could use parental leave pay until the child turned two with both parents able to share the leave and take days at the same time.

The government said the amendment to the parental leave program would “provide parents greater flexibility in how they take leave and encourage them to share care to support gender equality”.