What is Changing for Kiwisaver and Paid Parental Leave?

From 1 July 2024, new Kiwisaver regulations allow those on paid parental leave to opt for Kiwisaver contributions to be deducted from their fortnightly payments. This means you'll not only continue to build your retirement savings with your own contributions, but also receive a 3% employer contribution from Inland Revenue.

Parents who continue to receive salary and wages from employers while on parental leave, will have Kiwisaver deductions and employer contributions unless they opt for a savings suspension. (Before applying for a suspension, be aware if you intend to use your Kiwisaver for a first-home deposit, you will need to show you have been in Kiwisaver for at least three years.)

Who Qualifies for Paid Parental Leave?

If you are the principal carer for a new baby or a child under 6 entering your care, you can receive payments for up to 26 weeks (6 months) from Inland Revenue. Eligibility is based on your work record over the previous 52 weeks. You may also be eligible if you miscarry or have a stillborn baby.

You must have worked for an average of at least 10 hours a week for any 26 weeks over the 52-week period. Paid parental leave is available to self-employed, but the calculation of eligibility is slightly different. If you have income from salary and ages and self-employment you can’t combine the hours worked in each capacity.

Keeping in touch hours is also slightly different for employees and self-employed people. If you’re an employee, you can perform up to 64 hours of paid work for your employer while on paid parental leave. This is invaluable for keeping up your networks with your colleagues, building your knowledge and keeping your skills sharp. If you’re self-employed keeping in touch hours do not apply, but you can use your time for occasional oversight or administration of your business, like sending out invoices.

Paid Parental Leave is not restricted to the mother, yet it is more common for women to apply for paid parental leave. Perhaps the recent improvements to the paid parental leave scheme will encourage more men to take leave from work to be the principal carer.

How Big Is the Retirement Savings Gap for NZ Women?

In 2022, the Te Ara Anunga Ora Retirement Commission reported a 20% difference in average Kiwisaver balances between genders, with a staggering 30% gap among those aged 46-55[i].

Paid Parental Leave Kiwisaver is Only Part of the Solution

Closing the retirement savings gap requires a comprehensive strategy. While the new Kiwisaver changes are a positive step, we must also address broader issues like the gender pay gap and unconscious biases.

Is My Pay Gap Showing?

The nationwide gender pay gap is currently 8.6 percent[ii] and has been steadily falling from 16.3% in 1998. Significant disparities remain, particularly for wāhine Māori, Pacific, Asian women, and disabled women. Differences in choices of occupation and working part time only explains about 20% of the gap. The remaining 80% are “unexplained” factors that are hard to measure, such as conscious and unconscious biases and differences in choices and behaviours.

If you are an employer, review where your gaps are now, and identify where you can make changes. Remove gender biases from your recruitment process. Set your starting salaries without using gender as factor and make your that gender isn’t a factor in the same or similar roles. I recall a male candidate asking for $5,000 more than the female candidate, despite having similar experience and qualifications. We offered the same rate to both candidates.

If you’re a job seeker or looking for promotion, find out what you are worth beforehand, and be prepared to negotiate for the right salary and conditions. Consider applying for jobs even if you don’t meet all the key requirements. Look for work with organisations with equity, diversity and inclusion in their policies.

You can find helpful tools and guide here: What's my Gender Pay Gap? | Ministry for Women

Normalise Household Roles as Gender-Neutral

Teaching all children to perform household tasks, regardless of gender, can promote equality. In our home, even though I prefer cooking and my husband prefers house maintenance, we share these responsibilities. My husband does all the laundry, even if he can’t sort the socks, and he does the after-school activities with the kids. When my husband hurt his shoulder recently, I learned to use the lawnmower.

Normalise Conversations about Money

Talking openly about money with your partner and children is crucial. It's not just about cutting out luxuries like avocado toast but making informed decisions about spending and saving for the future. In our home we use The Barefoot Investor for Families as our guide for teaching our children about money behaviours. Books — The Barefoot Investor - Scott Pape

How Do I Learn to be a Savvy Investor for Retirement?

Becoming a savvy investor starts with educating yourself. Reputable sources like Sorted provide simple, bite-sized financial advice. Use their retirement savings tool to work out your savings goals. Work out your retirement numbers – start planning today (sorted.org.nz)

Talk with an investment advisor. They are specialist financial advisors who can help you reach your retirement goals, by investing for you. They assess your investment risk appetite, your current lifestyle, your needs and what’s important to you, so the plan is tailored to suit you.

If your business is reliant on you working full-time in it, think about how it can be less reliant on you as you approach retirement. What passive income streams can you develop? How can you shift the “doing” part of your business to other people?

My Experiences of Gender Inequities and Impact on Savings

Gender inequities have always been close to my heart, especially after my own experiences as a working mother. When I had my two daughters, I chose to be the primary carer, even though I earned more than my partner. This decision brought several challenges and taught me valuable lessons about financial planning and resilience.

When I was preparing to return to work after having my first baby, I realized the need to balance my professional and personal responsibilities. I explained to my employer about daycare closing times and the necessity of avoiding late work drop-offs. However, this conversation was misunderstood, leading to a month-long restriction on emailing clients upon my return. This period made me acutely aware of the professional setbacks that can accompany parental leave, especially for women.

I learned the importance of clear communication and setting boundaries with employers. It's crucial to advocate for yourself and ensure that workplace policies support parents returning to work.

After my second child, I faced another setback. My position was made redundant during my eight-month leave. This break from work resulted in a loss of professional connections and business networks, making it challenging to re-enter the workforce. It took another eight months to secure a position at JDW, during which my husband continued to build his KiwiSaver contributions, while mine stagnated.

This experience underscored the financial impact of career breaks on retirement savings. It reinforced the importance of proactive financial planning and seeking continuous professional development, even during parental leave.



Here’s How We Can All Address the Retirement Shortfall

The government's recent changes to KiwiSaver during paid parental leave are a positive step towards addressing the retirement savings gap for women. However, it will take collective effort to close this gap completely. Here are some steps we can all take:

Have Open Conversations About Money: Normalize discussions about financial planning with your partner and children. Share your financial goals and strategies to foster a culture of transparency and joint decision-making.

Challenge Gender Roles: Encourage gender-neutral roles within the household. Share responsibilities equally to ensure that both partners have the opportunity to focus on their careers and financial goals.

Address the Gender Pay Gap: As an employer, regularly review your pay structures and recruitment processes to eliminate gender biases. As an employee, advocate for fair pay and seek opportunities that promote equity, diversity, and inclusion.

Educate Yourself on Financial Planning: Utilize resources like Sorted and seek advice from financial advisors to make informed investment decisions. Consider how you can build passive income streams and ensure your business or career is resilient to changes.

By sharing my personal experiences, I hope to inspire other women to take proactive steps in their financial planning journey. Together, we can work towards a more equitable financial future for all women.

Remember, every small step counts. Whether it's having a conversation about money, negotiating for a fair salary, or making informed investment choices, each action contributes to closing the retirement savings gap and achieving financial security.

-       Serena Irving

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, business consultants, tax advisors, trust and business valuation specialists.

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An article like this, which is general in nature, is no substitute for specific financial advice. If you want more information about the issues in this article, please contact your financial advisor or the author.

  [i]https://retirement.govt.nz/news/latest-news/what-does-retirement-look-like-for-women

[ii] What's my Gender Pay Gap? | Ministry for Women