Superannuation… It’s something that really isn’t at the forefront of a new parent’s mind. Especially when they are knee deep in sleep routines, nappies and feeding. But one glaringly obvious statistic that is perpetuating in this demographic is that whilst on parental leave, they are missing out on significant amounts of superannuation. So maybe it should be at the forefront of their minds?

Recent studies have produced the following:

• 1.45 million parents received the Commonwealth’s parental leave pay in the last 10 years. In this period, these primary caregivers missed out on $1.6 billion in superannuation
• 171,000 women missed out on $216.7 million in super payments in the 2019/20 financial year alone
• Ultimately, a typical parent-of-two would potentially miss out on $14,000 from their final retirement savings because super is not paid whilst on parental leave

The Association of Superannuation Funds of Australia (ASFA) recently stated that an individual needs to have $545,000 in their super at the age of 65 (or $640,000 if they’re part of a couple) to allow them to live in a comfortable standard of living in retirement. This comfortable living is based upon an annual income of $44,818. A figure in which will need to be increased given that the current cost of living is significantly increasing.

To achieve this, they say your super balance at the age of 30 needs to be $18,284. Seems achievable… But then by the age of 35, this balance needs to be at $53,114, then $100,789 when you’re 40!  Sounds daunting, doesn’t it?

According to the Australian Institute of Family Studies (AIFS), fertility rates are at their highest in a woman’s 30’s. In this age bracket, no superannuation is earned if a woman is on government parental leave, and less is accrued if the primary caregiver returns to the workforce at reduced hours. So, their superannuation balance is trending upwards at a much slower rate when in reality it needs to be significantly increasing for them to afford a comfortable retirement.

So, what is the answer?

The proposal that has the most traction is the government paying superannuation on parental leave. If enacted, an Industry Super Australia (ISA) report found that our typical parent-of-two would have $26,500 more super at retirement.

If you find yourself in a situation where a return to the workforce means reduced hours, a few super saving strategies that can help boost your balance:

• Salary sacrificing (if your cost of living allows)
• Spouse contribution tax rebate
• Consolidation of your superannuation accounts
• Discuss superannuation strategies with a financial planner to tailor to your circumstances

It’s easy to fall into the trap of thinking that superannuation savings is a “future you’s” problem and something not requiring a lot of energy at the moment. But natural progressions in family life could have a significant impact. So until a government solution is found to help parents on parental leave, spare “future you” a thought and integrate some super saving strategies.

Written for you by Keira Borg