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A little baby bump in KiwiSaver contributions, courtesy of Wellbeing Budget 2023

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:

up to the maximum weekly amount of $662.12 gross. So that’s before tax and 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:

  1. Loss of income: when a woman takes time off work to raise a child. This loss can be particularly pronounced if she had a well-paying job or a promising career trajectory.
  2. Reduced retirement savings
  3. Limited career progression: Extended breaks from the workforce can hinder career progression. Women may miss out on promotions, salary increases, and valuable work experience during their time away, which can have long-term financial consequences.
  4. Wage gap and gender discrimination: Women who re-enter the workforce after a career break may face challenges in negotiating higher salaries or may be offered lower-paying positions due to biases and stereotypes.
  5. Dependent on partner’s income: Taking time off work can make women financially dependent on their partners or spouses, potentially creating an imbalance in financial decision-making and reducing their financial autonomy.
  6. Higher childcare expenses: While not directly related to the financial disadvantage of taking time off, it is worth noting that women may face increased childcare expenses when they return to work. This can further impact their financial situation.

Men also face some of these issues if they decide to be the primary caregiver and to be fair, we do see more of them entering this space.
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.