He has also been able to pay his student loan off, while hers has remained the same for the past 13 years.
Wellington woman Jess is in a similar situation. She did recently pay her student loan off, but it took much longer than her husband’s, and her KiwiSaver is about a third of the size of his.
She took time off to have children and has mostly worked part-time since then.
“I haven’t saved very much and now my earning potential is so much lower than his. I have always felt I would be kind of screwed financially if we split up and KiwiSaver is only part of it, but it’s also the fact of me doing the lion’s share of the caregiving that he earns so much more than me. It is 100% the motherhood penalty.”
Kate said it would have been good if there was a mechanism by which some of her partner’s contributions could have gone to her KiwiSaver account or payments to her student loan.
She said she tried not to worry about the KiwiSaver aspect too much because if they were to split, the investments would become relationship property and she would be entitled to a share. But he would still be in a better financial position in his career.
‘Non-monetary’ contributions
Data provided by actuaries MJW earlier in the year for Te Ara Ahunga Ora Retirement showed there was a 25% gap between women’s average balances and men’s.
For people aged 56 to 60, women had an average balance of $48,489 and men $66,312. For those aged 61 to 65, men had an average of just over $70,000 and women $51,971.
Financial adviser Rachelle Bland said women who were juggling caregiving roles should not have their worth measured by their KiwiSaver balances.
“She contributes in meaningful, non-monetary ways that are essential to the wellbeing and functioning of the family.
“Unless you have a contracting out agreement, KiwiSaver is considered relationship property. Therefore, the actual dollar value of each person’s KiwiSaver account balance is secondary in the event of a separation, as the division of all assets is based on equal entitlement.
“However, if your wife or partner hasn’t worked for several years, she could be on a lower tax rate for KiwiSaver - as it is based on your previous two years' earnings. So if you are contributing more than 3%, then it could make sense to redirect those additional contributions to her KiwiSaver account via voluntary contributions. That way the family unit gets the benefit of her lower PIR rate and she receives the annual Government contributions.”
Liz Koh, of Enrich Retirement, said people should keep up the minimum contributions required to get the member tax credit of $521 a year from the Government even if they were not working. This requires contributions of $1042 a year.
“This can be done by direct payments into your account either once a year or on a regular monthly basis. Life has seasons that change. When the season of caring for others has finished you can get back on track again by increasing your contributions. Knowing what your long-term goal for retirement savings needs to be will you work out how much you need to contribute to make up for the times when your earnings have been lower. ”
Some employers have committed to making contributions while employees are on parental leave.
As of this year, the Government will also make a 3% contribution to KiwiSaver for people who are on paid parental leave if they continue their own contributions.
