Super and maternity leave
How super affects you on leave
Super is a long term investment and what you do now can have a big impact on how much money you have when you retire. Each year, your contributions and balance are affected by earnings and the following year those earnings also are affected by earnings, and so on; this effect is called compounding and is why making more contributions now is usually more effective than bigger contributions later. Of course, in some years the earnings may be negative but the long term trend for super is growth.
Taking maternity leave for 6 weeks may not seem like a big difference in the long term, but if you take 12 months or longer you will probably miss out on a lot of employer contributions and any associated earnings. If you are currently making contributions that stop while you are on leave, the impact is even bigger. And with the expenses associated with being a parent, some say you may need more super in the end, too!
Preparing for maternity leave
Once the baby arrives, you are likely to be busy enough without worrying about your super so planning ahead will save you some worry and stress. It may also mean one less direction to stretch your reduced income while you are not working.
- Have a look at your super – is it consolidated into one low fee account or is it scattered and costing you in multiple fees? Is it in a profit-for-members fund like AvSuper that accepts all types of contributions and allows non-working members to stay members?
- Consider your investment options – AvSuper’s default option offers a balance between risk and returns but while you have plenty of time to retirement a higher risk and higher return option may suit you.
- Contribute to your super now – while you are still working, make some extra contributions to your account to replace at least some of the employer contributions you may miss while on parental leave (even if you are lucky enough to get employer contributions while on leave, check if they cover the full period of your leave). Contributing through salary sacrifice may save you tax and personal (after tax) contributions may qualify you for the government co-contribution so don’t just assume you can’t afford it right now – and living on less money could be good practice!
- Set a budget for while you are on maternity leave, allowing for your reduced pay and any government assistance you may be eligible for. If that budget allows, decide on a regular amount that can be contributed to your super (it really doesn’t have to be much, even the amount you used to spend on a daily coffee at work can now be put into super for surprising benefits). Ideally, set up a direct debit with your bank so the money is contributed to your super each month without any further effort on your part. You may also be eligible for tax deductions for your contributions.
- If you are part of a couple, look at how your spouse can help you maintain your super account, too. Spouse contributions may get your spouse up to $540 as a tax offset, and AvSuper charges nothing to help you with contribution splitting.
And don’t forget to consider what happens to any insurance cover you have associated with your super account. You may be relieved to know that your AvSuper insurance will continue for up to 24 months of parental leave so there’s one less thing for you to organise.
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