How do we deal with superannuation?

Image: Rassic Photography

I imagine a lot of people may be a bit perplexed with this topic. Like, what do you mean when you say we need to talk about super when it comes to family conversations? Where on earth does that fit in?

I will say this unequivocally: you need to talk about super.

When one parent, and in Australia this is overwhelming the mother (or birth mother), takes time out of the workforce to have a baby, it has flow-on financial implications for the rest of their (her) life. 

A period without pay or reduced pay is a household decision, but the corresponding impact on superannuation hits women squarely in the chest. Then, this impact compounds over time.

This has been happening for as long as superannuation has existed.

But it doesn’t have to continue.

Why? Because you and your partner can split (or share) superannuation contributions.

This scheme is not well known amongst Australians, and indeed not enough advisers utilise it, but I’m on a mission to change that. This is why this is the first of my 6 money topics to discuss.

What does contribution splitting mean? 

Contribution splitting is where you submit a notice to your partner’s superannuation fund and say hello, please direct some of his (or their) money over to my account. 

You can nominate a % or a $ amount for each financial year.

Game-changer.

This is different from spouse contributions to super, which may be applicable if you’re a low income earner, working part-time or currently unemployed. Spouse contributions can be attractive due to tax offsets, but this also assumes that you have spare cash available to contribute to super and that you wouldn’t prefer to direct those funds towards other goals. 

You can bet your bottom dollar that Mr. Pritchard and I had this conversation and put this into action. 

I would like to see families actively calculating what is a fair allocation for both parents on two fronts.

The parental leave period

When we started our family, I took just shy of 6 months out of the workforce on unpaid leave. That meant 0% superannuation contributions for Rebecca and business-as-usual 9.5% contributions for Mr. P. We did a rough calculation (I highly advocate for not getting too bogged down in getting calculations absolutely perfect) that considered the length of time out of the workforce, his normal super contributions and my normal super contributions. 

It meant that in that first financial year, I called dibs on about 35% of the money that Mr. P’s employer was contributing to his super fund. 

The ongoing impact of working part time

As a family, we decided I would return to work part time after my maternity leave period. Fabulous for our family unit, terrible for the financial impact on my superannuation. 

So, we got the calculator out again and worked out how to best allocate funds. If I was working 60%, and Mr. P was working 100%, we decided to go down the middle and act as if (from a super perspective) we were both at 80% levels. So, this time I would get 20% of his employer contributions in addition to my own employer contributions. 

Now, the calculations got a bit funky for us due to having 2 babies in 18 months, but you can see the objective that we’ve focused on here. 

As long as I am working less than full time in paid employment, we will continue to have this conversation each year and submit the forms to the super fund. 

In my family, this is non-negotiable. 

I want it to be non-negotiable for you too.

We also need to stop considering this to be an awkward conversation to have with our partners. Does your partner feel awkward because they can’t physically carry the baby? No, that’s the way it works. Well, when it comes to money, this is the way it needs to work too. 

Does it really matter if it’s all household money? 

I would really love to say no. I would love to say that you and your partner, like me and mine, will stay happily together for decades and retire (or begin accessing our super) in perfect harmony.

That is not what the world looks like.

This issue is a massive contributor as to why there is a 28% superannuation gap between men and women at the age of 60-64 and a 35% superannuation gap in the peak earning years of 45-49 (KPMG, 2021). This is also why women over the age of 55 are the fastest growing cohort of people experiencing homelessness (StreetSmart, 2021). 

My superannuation balance contributes to my sense of financial security.

Ensuring that I am not directly financially penalised for doing the fundamentally amazing job of carrying, birthing and caring for our children sets an important tone for our relationship with each other, and with our money. 

It is also important to note that this is not actually linked to the life event of having children. This means that if your child is now 7 and you’re thinking ‘honey, we gotta talk’, it’s not too late. You can start today. It might take a couple of financial years to square it all up (because you still have to play within contribution cap rules), but it’s absolutely achievable. 

Women, men, let’s get this done.

(If you are unsure on the actual administration of this, talk to your financial adviser or superannuation fund and get their help)

KPMG, The Gender Superannuation Gap (August 2021)

StreetSmart, Poverty and Homelessness – The Reality For Too Many Older Women (13 July 2021), https://streetsmartaustralia.org/poverty-and-homelessness-the-reality-for-too-many-older-women/