Thousands of Australians will boost their retirement savings next year after the Federal Government revealed it would use superannuation to pay for parental leave. But before that begins, experts are urging Australians to take this step.
From 1 July 2025, more than 180,000 households will receive a 12% superannuation on government-funded parental leave. This would cost $1.1 billion over four years, with an additional $600 million each year thereafter in federal funding. revealed.
The measure would initially add $4,250 to the retirement savings balance of mothers earning the median wage, according to Treasury estimates.
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The Australian Superannuation Funds Association (ASFA) estimates that if the paid parental leave policy were fully expanded to 26 weeks, balances would increase by about $5,100.
Mozo spokeswoman Rachel Wassell said the big changes were a “wake-up call for Australians to re-evaluate their super fund choices”.
The group’s research shows that 50 per cent of Australians still have the same super fund they had when they started their first job. When comparing super funds, only 9% chose a fund with lower fees, and just 14% switched to a fund offering better returns.
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“Choosing a super fund should not be a default decision. It’s alarming that half of Australians are stuck with a fund from their first job,” Mr Wassell said.
“With 20% of Australians admitting they have never compared funds, there is a huge opportunity to potentially increase their retirement savings.”
ASFA CEO Mary Delahunty said the sweeping changes were “an important and long-overdue step” to improve women’s financial security in retirement.
Women now retire with around 25% less super than men. According to KPMG data, women retire with an average balance of $146,900, while men retire with an average balance of $204,107.
ASFA found that taking paid parental leave at age 28 for the birth of a first child and age 30 for the birth of a second child would increase your super balance by at least $10,700 in today’s dollars.
How do superannuation changes work?
Under the plan, super benefits would be paid at 12 per cent of the paid parental leave rate (based on the national minimum wage). Based on the current rate of $882.75 per week, this works out to approximately $106 per week.
The measures follow the government’s expansion of the parental leave scheme. Now, the family can take her 20 weeks of leave. This will increase by 2 weeks each year until she reaches 26 weeks in July 2026.
Vacations are shared between parents. Currently and in 2024-25, two weeks of leave is set aside for second parents who have not used the majority of their leave on a “use it or lose it” basis. From July 2026, this will increase to four weeks. Single parents can receive the full amount.
What other superannuation changes will be made?
From July 1, 2026, retirement benefits will be paid at the same time as salary. So if you’re paying weekly, your super will also be paid at this point, and if you’re paying monthly, your super will also be paid.
This was announced in last year’s federal budget. Super is currently only required to be paid quarterly and Industry Super Australia says the measure will allow millions of Australians to receive an extra $50,000 in retirement and will reduce the amount of the country’s super. We estimate that this could potentially curb the devastation of unpaid debts.
From July this year, the super guarantee will also be raised from 11% to 11.5%. From July 2025, the guarantee will finally increase to 12%.
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