A recent report commissioned by Office of Retirement Commissioner found that the average KiwiSaver balance for women is 25% lower than for men.
Recognising the importance of addressing this issue, the New Zealand Government has taken the step in Budget 2023 to enhance the KiwiSaver scheme for parents, allocating $19.6 million in total operating funding.
How will this funding help bridge the gender retirement gap and offer greater support to parents during crucial phases of their child's life?
Women, on average, have historically faced challenges in accumulating sufficient retirement savings due to a combination of factors such as lower wages, career interruptions, and longer life expectancy. The impact of this gap becomes evident during retirement when women often have to manage on smaller nest eggs, leading to financial insecurity in their golden years.
One of the key factors contributing to the gender retirement gap is parenting. When starting a family, women often take on more childcare responsibilities, leading to career breaks or reduced working hours. These interruptions can hinder their ability to contribute consistently to their retirement savings.
In Budget 2023, the Government has pledged $19.6 million to enhance the KiwiSaver scheme for parents. The primary objective of this funding is to support parents and incentivise them to save for their retirement while acknowledging the value of unpaid childcare work. One of the key components of this initiative is the introduction of a matching KiwiSaver 'employer' contribution to recipients of paid parental leave.
Under this enhancement, parents who take paid parental leave will receive a corresponding KiwiSaver contribution from the Government. This means that while parents take time off to care for their newborns, their retirement savings will continue to grow, mitigating the impact of career breaks on their long-term financial security.
The additional support for parents comes as an extension of the 2018 increase in paid parental leave to 26 weeks, to assist families during the early months of a child's life. These first critical months are crucial for both parent and child bonding, and financial worries should not overshadow this precious time.
Besides fostering a more equitable retirement landscape, the enhanced KiwiSaver scheme for parents also serves as a reminder of the importance of retirement planning. For both men and women, consistent contributions to their KiwiSaver account throughout their working lives are essential to building substantial retirement funds. Starting early, making regular contributions, and taking advantage of employer and government contributions are some of the key steps individuals can take to secure their future.
The Government's decision to allocate $19.6 million to enhance the KiwiSaver scheme for parents is a commendable step towards bridging the gender retirement gap. By recognising the unpaid nature of childcare and providing matching KiwiSaver contributions to recipients of paid parental leave, the Government is helping parents to save for their retirement while taking care of their families. This initiative not only acknowledges the importance of parenting but also encourages individuals to take charge of their financial futures and strive for a more prosperous retirement.