I am about to have my first baby. I am really worried about my superannuation, especially as I am considering part-time work when I return from maternity leave. Is there anything I can do so as to ensure my super doesn’t suffer? — Helen
Excellent question Helen… I so wish more women asked it.
Now, I know nothing about you: age, occupation etc. What I do know is that a gap in savings early in your busy life will sap your leisure later. It kiboshes compounding.
Broken earnings patterns to care for children are a big contributor to a gender super gap of 42 per cent – that’s how much less women aged 60-64 have at retirement than men, according to the Association of Superannuation Funds of Australia ($157,050 versus $270,710).
Of course, the persistent gender pay gap, though its shrunk to 16.2 per cent, doesn’t help.
We women go and make this way worse, though, by typically living longer.
A smaller fun fund may have to stretch at least three years more.
Your wee one will no doubt be worth it Helen, but what dollar detriment might you face from three years out of the workforce, then 10 years part-time (say there’s another small person after this…)?
If you earn $35,000 a year, are aged 30 and have $10,000 in your fund today, Rice Warner Actuaries says you’ll be $42,000 down. On higher salaries the hit is bigger still.
All of which is why every year anyone is on reduced income, families need to do three things:
Get a free $500 in your fund
Once you’re earning again in some capacity, you can secure a $500 government super co-contribution when you tip in $1000 yourself. You get the full $500 on a salary of $37,697, phasing out by $52,697.
Snare a $540 tax offset
Even when you are not earning, your spouse can qualify for a straight tax discount by paying $3000 into your fund.
You need to make less than $37,000 to qualify for the lot; it zeros out at $40,000.
Rate your returns
If your super hasn’t made more than the 6.4 per cent for a balanced fund — SuperRatings says that is the median over five years to December 31 — then ditch the dud.
Find the fund best placed to make you financially secure at canstar.com.au (click ‘no’ to only show results that link to a fund’s website and scroll to below sponsored links)… and be sure to check out the enormous impact of fees.
There are all sorts of ideas to redress the fact super is inherently sexist, because it is earnings-based and women are still often primary progeny carers.
The Coalition has legislated a mop-up of five years’ unused contributions caps, which allows them to contribute again when they can.
Labor wants to abandon the silly $450-a-month-to-qualify rule and pay super on parental leave. I like it — although it has to be said the ensuing super amounts would be small.
Most interesting is the latter’s proposal to amend the Sex Discrimination Act to allow employers to level the longevity "paying field" and contribute more super for female workers.
Rice Warner calculates 2 per cent extra does the trick… and had to gain permission from the Human Rights Commission to pay this for its own staff.
Whatever happens, use that as your guide and salary sacrifice 2 per cent whenever in future you actually get paid for your work. And congratulations!
Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. Questions: firstname.lastname@example.org.