23/5/2023 0 Comments
Last week, the Labour Government announced a new proposal to help close the gender gap in KiwiSaver balances.
For qualifying individuals taking Paid Parental Leaving AND contributing from that 3% into their KiwiSaver, Government will match the 'employer' contribution that you would normally get at work, for up to 26 weeks.
T&Cs apply so be sure to read the eligibility requirements here for PPL.
The cost to Government has been estimated at around $19.6 million p.a.
The value to the mums (and dads) who take up this nugget?
It depends on your pre-baby income.
According to Employment NZ, paid parental leave payments equal the greater of:ESCT (Employer Superannuation Contribution Tax).
Quick back of the envelope, your new combined KiwiSaver contribution via PPL, works out to around $40 a week (max). This is before regular tax and ESCT but that roughly $1,032.90.
To be eligible to receive the full regular Government contribution of $521 a year, you have to paid $1,043 into your KiwiSaver account between July 1st and June 30th each year. That's out of your own ledger so this portion alone won't get you all the way there.
I don't have any stats on hand on the average time out of the workforce women (or men) take to raise families and this baby bump in KiwiSaver is only for 26 week period but it's a good start. especially if it gets women who wouldn't otherwise qualify over the line for getting the $521 additional.
Ideally, you should try to maintain the same level of contribution you were making working full-time but I know this will seem a preposterous suggestion during a cost of living crisis, where mortgage repayment increases and falling house prices are putting people into serious financial distress.
Having kids, just like having pets, is a financial liability but hey that's not why we do it.
This is coming from a mother of two and pet owner of 3, well now 2 sadly.
Not everything is about money, but it sure can feel like it in this country.
For context, when I moved here from Canada in 2007, Paid Parental Leave was a scant 12 weeks and KiwiSaver was only just introduced. By comparison, maternity leave in Canada is one year. You get, or used to 50% of your gross average earnings for a whole glorious year, which is a great head start for baby. Other workplace retirement schemes and Government incentives to have you save for retirement have been around for decades.
Even so, women there and elsewhere till face a retirement saving shortfall relative to their male counterparts.
I call it the "baby premium."
A few ways the fairer sex is disadvantaged:
Still, the data shows a clear picture.
According to research by the Retirement Commission, women in their 40s have balances 30% lower than men in KiwiSaver. That gap increases to 32% in the following decade, just around the time that many marriages start splitting up!
All the more reason to keep up those KiwiSaver contributions and to celebrate this Wellbeing Baby Bump, small as it is.
Amanda is a personal finance specialist and published author based in Auckland, New Zealand. She is also a certified meditation and yoga instructor which informs her teachings on financial wellness.