The National Capital Team
Auckland, July 25, 2024
Starting July 1, new measures aim to address pension inequality between men and women.
On average, women have 25% less in retirement savings than men, primarily due to career breaks for raising children and often returning to work part-time.
Despite their significant contributions to society, women receive no recognition for raising future taxpayers.
To help bridge the KiwiSaver gender gap, several positive changes are coming into effect: (a) Paid parental leave (PPL) payments will increase from $712.17 to $754.87 per week for the six-month PPL period (b) The IRD will now add the 3% employer contribution if you request to continue your own KiwiSaver contributions from your PPL payment.
Currently, employer KiwiSaver contributions typically pause during parental leave, and contributions are not automatically deducted from PPL payments. This often results in not reaching the annual $1042.86 contribution threshold necessary to qualify for the government’s $521.42 contribution.
This government contribution basically offers a 50% return on your investment! Market performance over the long term typically compounds that even further—a great opportunity for KiwiSaver members.
Optimising KiwiSaver Contributions
If you are on parental leave, here is how you can optimise your KiwiSaver contributions:
Request the IRD to continue your KiwiSaver deductions when you apply for PPL.
If your parental leave extends beyond 26 weeks, set up a voluntary contribution to your KiwiSaver account.
The 26 weeks of PPL contributions amount to $589, so you may need additional contributions to reach the required $1042 by June 30 each year depending on the timing and how much you are contributing while working on either side of your leave during that specific 12-month window of 1 July – 30 June. Consider setting up a direct debit of $87 per month to your KiwiSaver account after PPL if not working again.
Your contribution, no matter how small, adds up and compounds over time, significantly impacting your long-term savings.
Strategies for Catching Up
Even before returning to work, you can take steps to optimise your retirement savings. Ensure your fund type is optimal for your risk profile, within that, consider a provider with strong reasoning (it might be worth shopping around) and make the most of accessing personalised advice for free. If your personal finance is on point with things like emergency funds and insurances in place it may then be time to consider increasing contributions as well.
For free, independent KiwiSaver advice, visit: National Capital’s KiwiSaver HealthCheck
By taking these proactive steps, you can help secure a more robust retirement savings plan and contribute to closing the gender gap in KiwiSaver.
TheNational Capital Team is a financial advisory firm providing personalised investment advice, primarily focusing on KiwiSaver. Disclaimer: The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
