Super on Paid Parental Leave

It's the first step in closing the gender super gap, says Dr David Knox

From 1 July 2025, the Labor Government will pay superannuation as part of Paid Parental Leave (PPL), an initiative announced alongside the release of the wider Working for Women strategy.

If the Senate approves this plan, parents taking leave to care for their newborn children will receive super in addition to their 24 weeks of PPL. The plan also allows for an expansion of the leave allowance to 26 weeks by July 2026.

We’ve seen good progress on the gender pay gap in Australia, with the 2024 Status of Women Report Card showing it has reduced from 13.3% in November 2022 to 12% in November 2023. But when we consider differences in income, we also need to address the gender super gap.

By retirement age, women have around 25% less than men in their super balance, with the median balance for those aged 60 to 64 at $211,996 for males and $158,806 for females1 – that’s more than $53,000.

While there are many reasons for this gap, a significant one is taking time out of the workforce or working part-time to raise children and care for ageing relatives.

Raising the next generation is a powerful contribution to our society. But it's crucial that their ideal retirement shouldn’t become a sacrifice.

“It’s predominantly women caring for young children, so it’s predominantly women who are missing out. Super on paid parental leave recognises that by caring, they are disadvantaged – but this shouldn’t be the end of the story.”

Dr David Knox, Senior Partner, Mercer

All Australians receive super on annual leave and long service leave, so it’s surprising it’s taken this long to make it a compulsory payment on paid parental leave. But while this is a step in the right direction, it’s only the beginning.

At Mercer, we’ve been working for some time to help carers, and in particular mothers, close this gap – and enjoy the retirement they’ve worked so hard for. Our commitment to addressing these challenges is reflected in the Mercer CFA Institute Global Pension Index. This index provides valuable insights and solutions to address retirement challenges, aiming to improve financial security for retirees worldwide.2


An extra boost when it matters


Because super compounds over time, small additional payments earlier in life can have a significant impact later, making a considerable difference when you retire.

That’s why we’re advocating for a ‘baby bonus’ or 'carers’ allowance on top of super on paid parental leave. This would be an additional government payment of around 11% of the minimum wage, directly into the parent’s nominated super account while on parental leave. This currently works out at about $5,000 per child.

We’ve seen examples of this in Germany and Canada where the caregiving parent is allocated a pension credit annually for the first three to seven years of their child's life.

While this measure comes at an additional cost to the government’s budget, it’s an investment in women now, and in the future. After all, the more we have saved for retirement, the less we need to rely on the government-funded Age Pension.


Gender shouldn’t affect retirement choices


Annuities, also known as lifetime pensions, give you a guaranteed income for the rest of your life. They are another area where women are disadvantaged, as they may pay more than men due to statistically living longer. 

We believe it’s time to introduce the concept of unisex annuities. Everything else in the retirement phase is unisex – we all get the same super contribution percentage or Age Pension.

This is a simple change that won’t cost the government anything. That’s why we’re advocating for an update to the insurance rules so that women cannot be discriminated against purely because they’re women. These rules already apply in Europe.


Taking the first important step


As advocates for gender equity in retirement, we’re calling for wider recognition of the sacrifices involved in taking time out of the workforce to care for children. Sacrifices predominantly made by women.

Having and caring for children shouldn’t mean a risk for financial disadvantage in retirement. And while guaranteed super contributions as part of the Paid Parental Leave is a start, there’s still a lot more to do to address the inequities that women are facing in this space. Join us as we continue to advocate for change that will truly close the gender super gap.  

About the author:

Dr David Knox, OAM

Senior Partner, Senior Actuary - Mercer

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Disclaimer: Issued by Mercer Superannuation (Australia) Limited ABN 79 004 717 533, Australian Financial Services Licence 235906, the trustee of the Mercer Super Trust ABN 19 905 422 981 ('Mercer Super'). The material contained in this document is based on information received in good faith from sources within the market and on our understanding of legislation which we believe to be accurate. ‘MERCER’ is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917.