When a couple decides one parent will step back from paid work to care for children, most of the planning conversation is about the household budget. What happens to the mortgage repayments. How to manage on one income. What childcare will cost later on. One thing that rarely comes up, but should, is what happens to that parent’s KiwiSaver while they’re not earning.
It’s a simple question, and one worth raising well before the time out of paid work begins, rather than years later when the gap in savings has already grown.
For most parents, this plays out in two stages. There’s the period covered by Government-funded paid parental leave, where KiwiSaver works a little differently to what you might expect, and then whatever comes after it, whether that’s a return to work or a longer stretch of unpaid time. Here’s what to know about both.
Government-funded paid parental leave provides eligible primary carers with up to 26 weeks of income support, paid by Inland Revenue rather than an employer. KiwiSaver contributions aren’t deducted from paid parental leave (PPL) payments automatically, they’re optional, so it’s easy to assume they’ve stopped by default. However, you can ask Inland Revenue to deduct your usual contribution rate from your PPL payments, either when you first apply or at any time afterwards through myIR, and you can stop the deductions the same way if your circumstances change.
Importantly, the Government has provided a genuine incentive to opt in. If you choose to have contributions deducted from your PPL payments, Inland Revenue also adds an employer-equivalent contribution of 3.5% on top, in the same way an employer would if you were still working. It’s a benefit that’s easy to miss, since PPL is often exactly the period it feels least necessary to think about KiwiSaver.
If you’re still receiving pay from your employer during parental leave, for example through a top-up arrangement, your employer will keep deducting your usual KiwiSaver contributions and making compulsory employer contributions, unless you have a savings suspension in place. You can also choose to pay contributions directly to your KiwiSaver provider yourself, rather than through payroll or PPL payments, if that suits your circumstances better.
One thing worth flagging for anyone planning to use KiwiSaver for a first home purchase: pausing contributions during paid parental leave can affect first-home withdrawal eligibility, so it’s worth checking the rules with Kāinga Ora before deciding whether to opt out.
Once paid parental leave payments end, or if a parent takes further unpaid time away from work, several things pause at once. KiwiSaver contributions stop, because there’s no pay to deduct them from. Employer matching contributions stop for the same reason. And unless the account keeps receiving contributions from another source, the annual Government Contribution stops too.
The KiwiSaver balance itself doesn’t disappear, and it keeps growing (or moving with the market) based on how it’s invested. But the contributions that would have gone in during that time never happen, and neither does the investment growth those contributions would have gone on to earn. That second part is easy to overlook but it’s often the bigger cost over time.
Once PPL payments end, or if you choose not to have contributions deducted from them, the opportunity cost of missed contributions becomes the main thing to manage. Because KiwiSaver contributions are invested, money that goes in earlier has longer to grow before retirement. A contribution missed today isn’t just that dollar amount lost. It’s that dollar amount, PLUS every year of investment growth it would have earned between now and retirement age.
How large that gap becomes depends on the fund type, contribution level, and the number of years left until retirement.
While this can be significant, there is an option to minimise the opportunity cost of lost contributions by making voluntary contributions to the non-working parents account while they are out of paid employment. Most providers accept voluntary contributions, whether as a one-off lump sum or regular payments, from anyone (including a partner a family member). This is a great option for households looking to minimise the impact of a reduced income for the period one parent is out of paid employment.
If this is something that is financially viable in your household, the good news is that setting up voluntary contributions or one-off-payments is usually as simple as an online banking transfer using the account holder’s IRD number and KiwiSaver provider details. Alternatively, a regular payment can be set-up directly with the provider.
As an added bonus, the Government Contribution also remains available to non-working parents. Since 1 July 2025, the Government Contribution has been 25 cents for every dollar a member contributes, up to a maximum of $260.72 a year. To receive the full amount, at least $1,042.86 needs to be contributed to the account within the KiwiSaver year (which runs from 1 July to 30 June) and this amount can come from the member themselves, a partner, family member, or any combination of sources.
It’s natural for KiwiSaver conversations to centre on whoever is currently earning, since that’s where the active contributions are visible. But a household’s total retirement savings typically depend on both partners’ accounts, not just the one that’s growing right now.
Reframing the conversation this way, from “how is my KiwiSaver doing” to “how is our household’s KiwiSaver doing”, opens up a much more useful discussion. It also provides a good reminder to check in on the performance and settings of both accounts, including: fund choice, risk settings, contribution rates, and whether you are with a top performing provider.
If you are interested in reviewing your households KiwiSaver accounts, book a free review with one of our specialist KiwiSaver advisers by clicking here. We can review your accounts performance and settings, and work on a plan to ensure that your funds are in the best possible shape.
Yes. Anyone can make a voluntary contribution into a KiwiSaver account, including a partner, whether as a one-off payment or regular contributions. This can be arranged through the account holder’s KiwiSaver provider.
No. Contributions from paid parental leave (PPL) payments are optional. You need to ask Inland Revenue to deduct them, either when you apply for PPL or later through myIR, and you can stop the deductions at any time the same way.
Yes, and there are two separate contributions worth knowing about. The first is the regular annual Government Contribution: the Government adds 25 cents for every dollar you contribute to your KiwiSaver account, up to a maximum of $260.72 a year. This applies whenever money goes into your account, whether it’s from you, your partner, or anyone else, and it isn’t affected by anything to do with parental leave payments. The second is specific to Government-funded paid parental leave (PPL) payments. If you choose to have your usual KiwiSaver contributions deducted directly from your PPL payments, Inland Revenue also adds an extra 3.5% on top, matching what an employer would normally contribute. This second contribution only happens if you’ve actively opted in to have deductions taken from your PPL payments; it isn’t automatic.
Yes, as long as at least some money goes into your account within the KiwiSaver year (1 July to 30 June). You’ll receive 25 cents for every dollar contributed, up to a maximum of $260.72, so you don’t need to hit the full $1,042.86 to get something, that amount just unlocks the maximum. Contributions can come from you, your partner, or any other source, and you’ll still need to meet the usual age, residency, and income eligibility rules.
Generally, no. KiwiSaver balances can’t be moved between two separate members’ accounts outside specific circumstances, such as a relationship property settlement. A partner can, however, make new contributions into the other person’s account at any time.
It can. The impact isn’t only the contributions missed during that time, it’s also the investment growth those contributions would have earned in the years between now and retirement. The exact impact depends on the fund, contribution rate, and time remaining, so it’s worth having an adviser model your specific situation.
The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on current economic commentary, market pricing for interest rates, and our personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.
