Q: I'm having a baby, where does this leave me placed with KiwiSaver contributions going forward.

By Amanda Morrall (email)

Hi. Congratulations on the news and thanks for raising a good question.  I imagine other expectant mothers (and other working women considering motherhood) will be keen to know where they stand with KiwiSaver when baby arrives on scene.

I checked with Inland Revenue to get some clarification on the rules regarding Paid Parental Leave and KiwiSaver contributions so my answer below was guided by their official response.

There are a few  different scenarios that kick-in on maternity leave. As I don't know what your personal situation is, I'll outline them all.

Unless you negotiated a contract where your employer will continue paying you while you're on maternity leave, your KiwiSaver contributions will automatically cease unless you specify otherwise. You'll need to take the intiative with this. You were right about the KS 2 form. For the benefit of others reading this, here's the link to how to go about that.

If you decide to continue making KiwiSaver contributions, the Government will reward you by pitching in Member Tax Credits on your behalf. For the rest of this month (June 2011) you'll continue to receive matching credits up to a maximum of $20 a week. Starting July 1, those matching contributions from Government will be cut in half (to a maximum of  $10 a week) as per National's Budget 2011 announcement. As the payments are made once year, Government contributions (at the lower new rate) won't be paid to your provider until June 30, 2012 but they'll be calculated at the lower rate starting next month.

With Paid Parental Leave, Government will compensate for salary loss but it won't compensate for whatever contributions you'll lose from your employer by leaving the workplace.

However, as mentioned above, if you negotiated a paid maternity leave situation with your employer (that is in addition to Government support) then in theory your KiwiSaver contributions will continue from your employer. This would depend on your individual contract.

That said, there is nothing stopping employers from making "voluntary contributions" on your behalf whilst you are away on parental leave in which case your overall contributions to your savings wouldn't be dramatically affected. At least that would be the case if you continued making your voluntary contributions (triggering the Member Tax Credit) as well and were receiving the bonus benefit of employer contributions.

Whether it would make sense to continue making contributions while you're out of the workplace would depend on a few things includings a) your financial ability to do so and b) your overall financial situation including debt, mortgages and other responsibilities and c) your long-term plans and goals.

Planned parenting (that includes a heavy dose of financial planning) will undoubtedly alleviate a lot of stress. (Here's a few articles on the subject: "Bringing up Baby, it ain't cheap" by Janine Starks and "A costly wee bundle of joy" by yours truly).

Shrewd wage bargainining could prove a formative part of that plan, particularly with compulsory contributions increasing to 3% in 2013. Employers, understandably, will be looking to offload that expense by folding the added expense into a smaller salary. (See previous posting on the subject).

One would imagine that smart employers will do what they can to retain top talent and if that means KiwiSaver contributions (baby or no baby) on top of salary or as part of a negotiated package so be it. Oppositely, smart employees would do well to bring this item to the negotiating table early (when there is still good will and room to manoeuver) before the bump begins to show.

Don't lose any less sleep than you have to as a new mother. Get it sorted before hand. If not for No. 1, then definitely No.2.

Do you have a KiwiSaver question? Send us an email and we'll do our best to answer it.

Amanda