Here’s how Labor’s proposed $400m super policy could affect you
If women are paid super when on maternity leave, we're one step closer to eliminating the gender super gap.
The Labor Party has announced its plans to introduce a new policy which would see women receiving superannuation payments while on maternity leave. The proposed $400 million policy aims to help minimise the gender superannuation gap by eliminating one of the factors which contributes towards women retiring with 40% less super than men.
Factors contributing to the gender super gap
Women taking time out of the workforce to look after children is one reason why women are retiring with just $157,000 on average, compared to men retiring with an average of $270,000. But this is a double-edged sword; while women aren't working, they're not earning super, but they're still paying the same fees. These fees eat away at the balance they do have and prevents it from growing as much as it could be with regular top ups.
Another key contributor to the gender super gap is the ongoing pay gap experienced by women in the workforce throughout their career. According to The Australian Government Workplace Gender Equality statistics, women are on average earning 14.6% less than men. Because the super guarantee is paid as a percentage of your salary, this in turn means women are earning less superannuation than men.
There's also a little-known loophole in the current superannuation system which says employers don't need to pay their staff any super if they earn less than $450 a month. This threshold is more likely to negatively affect women than men, as women make up two-thirds (67%) of the part-time workforce. Because of this $450 threshold, one in five (20%) female workers is not receiving superannuation payments, according to figures by Essential Media for the Australian Institute of Superannuation Trustees (AIST).
Labor's policy would help close the gender super gap
The Labor Party's proposed $400 million policy would be one step in the right direction to closing the gender super gap in Australia. Currently, the government's parental leave scheme offers parents just over $700 a week; however, it doesn't offer super payments. This would change under Labor's new policy, with parents receiving super contributions either directly to their fund or to their employer to pass on.
The payments would benefit anyone on parental leave, not just women, although it will primarily benefit women as they remain the most likely to take time out of the workforce to raise children. The payments would be offered to parents who meet the current eligibility criteria for the paid parental leave scheme, which is estimated to be more than 200,000 Australians. Labor estimates that under the new policy, the average amount received to a single fund over a year would be around $400. However, compounded over time, this would amount to a great deal more by retirement.
Labor also announced its plans to gradually phase out the $450 threshold for receiving super payments over the next six years, so more part-time workers can receive super payments.