How to prepare for unpaid parental leave

While any parent might take leave to spend time raising their children, statistics show that it’s women who are most likely to take unpaid parental leave.¹ Over time, this leave can have a major impact on women’s financial wellbeing and retirement savings, with fewer contributions and lower super balances as a result.

On average, women are more likely to have lower super balances than men. Unpaid parental leave can be one of the reasons – here’s what you need to know.

Understand the impact of unpaid parental leave

Taking time off to raise children is something many parents might choose to do for months or even years. It’s important to make the right decision for your family and to understand the potential impacts on your financial situation so you can be prepared.

You might be eligible for government-funded parental leave pay (or other benefits), but if that runs out, you may have to take unpaid parental leave.

Lower contributions will impact your retirement savings

Similarly to other types of unpaid leave from your job, unpaid parental leave means your super account will receive fewer contributions over time.

Unlike unpaid leave you might take for a few weeks for an extended holiday or other reason, unpaid parental leave is more likely to stretch for months, which can have a compounding effect on your super balance. Instead of growing your retirement savings when you’re making regular contributions as usual, unpaid leave without super contributions leaves a lower balance to be invested in your super.

Your insurance could be impacted

If your salary is interrupted for a longer period, this could cause your insurance (such as Salary Continuance Insurance or SCI) to lapse.

If this is cover you have as part of your super account, you’ll need to make sure you understand how unpaid parental leave will impact this cover.

Practical steps you can take now

If you’re planning unpaid parental leave, here are some actions you could take which might help to bolster your retirement savings while you’re away from the office.

• Check your insurance cover
  Find out whether your insurance is going to lapse because of your leave. If your cover is set to continue throughout your leave, you may be eligible to complete an insurance waiver form to waive insurance fees during your leave. This might mean more is left in your account to be invested.

• Make extra contributions
  You might be able to make extra contributions to your super before you take unpaid parental leave – or even during your leave if it’s right for your situation. Initiatives such as government co-contributions could also help you to build your balance during your unpaid leave.

• Consider spouse contributions or contribution splitting
  If you have a partner, they might be able to contribute directly to your account. Another option could be to split their contributions across their account and your account to build both balances. These could have tax benefits for both you and your partner.

Remember, everyone’s family and financial situation is different. Seek professional financial advice before you make any decisions which could impact your financial wellbeing.

Watch the video

GESB Relationship Manager and mother of three, Jessie, talks through what unpaid parental leave means for your super and what you can do to prepare.