How parental leave affects your KiwiSaver
A lot changes when you go on parental leave, but have you thought through how having a child affects your KiwiSaver? Here’s how to make sure you can reduce the impact of taking parental leave on your retirement savings.
KiwiSaver is a straightforward way to invest in your future, with the added benefit of a government matching contribution every year.
It can be a win-win. But it’s not a flawless system when it comes to parental leave. In New Zealand, the average KiwiSaver balance for men is 25% higher than that for women. That equates to a difference of just over $6,000. As we approach retirement age, the gender gap grows even wider (MJW KiwiSaver Demographic Report).
Average KiwiSaver Balance by Gender
Source: Te Ara Ahunga Ora Retirement Commission and Melville Jessup Weaver 2023.
In a nutshell, this is because women are more negatively impacted by gender and ethnic pay gaps, spend more time out of paid work and are more likely to be employed in part-time roles than men.
It’s that second point that I want to double-click on because the impact of taking parental leave on your KiwiSaver can be a triple financial whammy:
By default, KiwiSaver contributions are not deducted from Government parental leave payments.
Your employer also stops their contributions. However, if your employer continues to pay salary or wages during parental leave, they are generally required to continue both employee and employer KiwiSaver contributions, unless you’re on a savings suspension.
With reduced contributions, you may not qualify for the KiwiSaver government matching contribution.
Frankly, systematic change is required from the government, employers and KiwiSaver providers to make KiwiSaver more equitable. In the meantime, we’ve outlined the actions you can take to minimise the impact of parental leave on your retirement savings.
Note: If you plan to use your KiwiSaver for your first home purchase, please check with your KiwiSaver provider how taking parental leave will impact your ability to withdraw the money. You can find general guidance on Sorted.
Action 1: Maximise your government matching
For every $1 you put into KiwiSaver between 1 July and 30 June each year, the government contributes $0.50. This is capped at $521.42, which means you will need to contribute $1,042.86 of your own money to obtain it.
The government doesn’t care whether you invest $21 every week or $1,042.86 in a lump sum, so you can make these contributions in a way that suits you, as long as you do it before 30th June each year.
Roughly 1.2 million people who belong to KiwiSaver haven’t made any contributions in the past year (Financial Markets Authority). That’s 40% of those enrolled!
Note: From July 1, 2025:
The maximum government contribution will be halved from $521.43 to $260.72, and the rate will be reduced from $0.50 per dollar to $0.25 per dollar. You will still need to contribute $1,042.86 annually to get the maximum government contribution.
People earning over $180,000 are no longer eligible for any government contribution.
What you can do now:
Set yourself a reminder for the 1st of March, repeating annually. When you get the reminder, check your KiwiSaver contributions for the year via MyIR (on the homepage, scroll to “KiwiSaver member” and click “Contributions Summary”). If you haven’t contributed $1,042.86 since 1 July the previous year, top it up to receive the full matching government contribution.
Another way to make this happen when you’re on parental leave is to set up a direct debit to your KiwiSaver provider of $21 a week. This way, your KiwiSaver contributions will happen automatically, and you’ll have contributed $1,042.86 by 30 June to receive the full matching of $521.42 from the government.
Include your KiwiSaver contributions in any family budgeting you do - after all, there’s no reason your retirement savings should take a hit just because you’re the one raising a human.
Action 2: Contribute more when you’re earning
You may want to consider increasing your contributions before taking parental leave or upon returning to work. The longer your funds are in KiwiSaver, the better your chances of a higher balance at retirement (thanks to compounding returns). So, when it comes to increasing your contributions, the generally accepted guidance is the earlier, the better, and the higher, the better.
What you can do now:
Your KiwiSaver contribution rate can be set to 3%, 4%, 6%, 8% or 10% of your pay. By default, it’s currently 3% and will rise to 3.5% from 1 April 2026, then to 4% from 1 April 2028.
You can change your contribution rate once every 3 months, unless your employer agrees to a shorter timeframe.
The IRD has guidance on how to change your contribution rate.
Action 3: Contribute to your KiwiSaver on parental leave
It can be tough to contribute to your KiwiSaver when money is tight. But if you think you can make it work during your parental leave, your long-term savings will be better for it.
From 1 July 2024, the New Zealand government began paying the equivalent of matching KiwiSaver ‘employer contributions’ on paid parental leave, provided you also make contributions.
As the default rates rise from 3% to 3.5% from 1 April 2026 and then 4% from 1 April 2028, we would expect the government’s ‘employer contributions’ on paid parental leave to increase in line with this.
Keep in mind that even if you receive the maximum paid parental amount from the government of $754.87 per week for 26 weeks, you may still miss out on the full Member Tax Credit. That’s because total KiwiSaver contributions from the Government paid parental leave at the default 3% rate would amount to $589 over that period, below the $1,042.86 threshold to maximise the Member Tax Credits.
What can you do now:
You can contribute to your KiwiSaver while on parental leave by:
Electing to have KiwiSaver contributions deducted from your parental leave payments when you complete your IRD application (or later in myIR if you’re already getting paid parental leave payments.)
Making your voluntary contributions to your KiwiSaver at any time. Contact your KiwiSaver provider to find out how to do this.
Action 4: Check if your credit card reward points can be converted into KiwiSaver contributions
Some credit card issuers in New Zealand allow you to convert your reward points into KiwiSaver contributions. This means you can save for retirement through your existing everyday spending, which is particularly helpful if you’re on a reduced income during parental leave.
What you can do now:
Typically, your KiwiSaver and your credit card must be with the same provider to convert the points. Contact your credit card issuer or KiwiSaver provider to learn more.
Crayon’s Financial Baby Prep Program includes interactive planning tools to help you and your partner estimate the impact of parental leave on your KiwiSaver. Ask your employer if they offer the program.
Now for the important legal part: Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 3 June 2025.
Stephanie Pow
Founder & CEO of Crayon