From July 1, changes have been made to reduce pension inequality.
On average women accumulate 25% less in their retirement savings than men. Although the gender pay gap is a factor, the main reason is that many women leave the workforce to have children and then return to work part-time.
To help address the gender gap in KiwiSaver some positive changes kick in from July 1.
- Paid parental leave (PPL) increases from $712.17 to $754.87 per week over the six month PPL period.
- The IRD will add the 3% employer contribution if you ask them to continue your own KiwiSaver contribution from your PPL payment.
Currently KiwiSaver contributions from your employer usually stop when you take parental leave and they are not automatically deducted from your PPL payments.
This also means you are less likely to make the full $1,042.86 annual KiwiSaver contribution and qualify for the government contribution of $521.42. As I always say, this is the best investment in town! A 50% return on your contribution irrespective of any investment returns.
Yes, times are tough and it may not be possible for everyone but this is what you should aim for while on parental leave:
- Ask the IRD to continue your KiwiSaver deductions when you apply for PPL.
- If your parental leave period extends beyond 26 weeks, set up a voluntary contribution to KiwiSaver.
To meet the minimum $1,042 threshold you can set up a direct debit to your KiwiSaver account of $87 per month to qualify for the full government contribution. The twenty six weeks of PPL contributions only get you to $589 and you need $1,042 each year to 30 June.
Every little bit helps and those contributions will compound over the long term.
Playing Catch Up
Even before you return to work there are ways to optimise your retirement savings. Being in a good fund and the correct risk profile for your age will literally pay dividends. If you can contribute a little more, maybe 4% instead of 3% this will also pay off in the long run.
For free, independent KiwiSaver advice click the button blow:
Author: Jean Strock is a Financial Adviser at Saturn Advice Limited, a financial advisory firm that provides financial advice in relation to investments and financial planning. Saturn Advice Limited is a subsidiary of Saturn Portfolio Limited and sister company of National Capital Limited and Saturn Invest New Zealand Limited.
"Disclaimer: The views expressed in this article are the views of the author. The information provided is of 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."
