What is the motherhood penalty, and how does it impact your KiwiSaver?

The motherhood penalty is the long-term financial disadvantage many women face once they become mothers. In New Zealand, it can quietly erode both current income and future retirement savings, including KiwiSaver balances.

Here’s how it typically plays out:

• Career interruptions – Time off for pregnancy and childcare often means missed pay rises and bonuses, as well as personal, employer, and government KiwiSaver contributions
• Reduced earnings – Many mothers return to part-time roles or accept lower-paid positions to balance work and family needs, cutting both salary and KiwiSaver contributions
• Slower career progression – Missed opportunities for training, promotions, or leadership roles can keep earnings - and contributions - below potential for years
• Workplace bias – Assumptions about availability or productivity can lead to fewer promotions or even demotion.

These factors combine to lower lifetime earnings and shrink the amount available to invest. This effect compounds: every dollar not contributed to KiwiSaver in your 20s or 30s loses decades of potential growth, leaving a noticeably smaller nest egg by age 65.

For Kiwi mums, the motherhood penalty isn’t just about today’s pay cheque: it’s a disadvantage that significantly reduces the option of being able to retire comfortably in years to come.

The hidden cost of motherhood on retirement savings

KiwiSaver balances take a hit when mothers pause or scale back work. Prolonged time off work may mean missing personal, employer, and government contributions, while moving to part-time slows savings and limits compounding growth.

Financial impact on women

The New Zealand Institute of Economic Research (NZIER) modelled four scenarios to show how time out of the workforce can reduce KiwiSaver savings and retirement spending power. All scenarios were compared with a woman who worked full-time with no career break.

Key assumptions

• Median female earnings with no pay-equity adjustment
• 3.5% annual return after tax and fees
• One pregnancy and one year of maternity leave with no KiwiSaver contributions
• 3% employee and 3% employer contributions.

Scenario results

• Scenario 1: Permanently exiting the workforce at 30 to start a family
  • Balance at 65: $195,493 – a loss of $318,385 versus a woman who continued working full-time
  • Lost retirement spending power: $17,210 less per year (≈ $331 per week)
    
    
• Scenario 2: Switching from full-time to part-time (3 days/week) work at 31 years old
  • 40% lower contributions
  • Balance at 65: $391,160 – down $122,718
  • Lost retirement spending power: $6,633 less a year (≈ $128 per week)

• Scenario 3: Switching from full-time to part-time (3 days/week) at 31, then back to full-time at 40
  • 40% lower contribution during part-time years
  • Balance at 65: $456,239 – down $57,640
  • Lost retirement spending power: $3,116 less a year (≈ $60 per week)
    
    
• Scenario 4: Using the findings of Sin, Dasgupta, and Pacheco (2018) on the motherhood penalty
  • Based on research showing mothers work 32.5% fewer hours and earn 4.4% less per hour after having children
  • Balance at 65: $400,947 – down $112,931
  • Lost retirement spending power: $6,104 less a year (≈ $117 per week)

How to avoid or reduce the motherhood penalty

While the motherhood penalty is a societal challenge, there are practical steps you can take to minimise its impact.

Continue making KiwiSaver contributions

• You can have KiwiSaver contributions deducted directly from the parental leave payments provided by the government. Starting 1 July 2024, choosing this option means Inland Revenue will also contribute the usual 3% employer share (which will increase to 3.5% in April 2026 and 4% in April 2028). You can also opt to pay KiwiSaver contributions directly to your KiwiSaver provider.  
• If you keep getting a wage while on leave, your employer will continue making KiwiSaver deductions and provide employer contributions (unless you take a savings suspension).  
• If you are not working, you can make voluntary contributions to your KiwiSaver provider.
• If your annual taxable income is $180,000 or less, you can receive a government top-up to your KiwiSaver. Contribute at least $1,042.86 of your own funds between 1 July and 30 June to get the maximum $260.72. If you contribute less, you’ll still get 25 cents for every dollar saved.
• Consider increasing your contributions before or after parental leave and around circumstances that force you to take career breaks or lower-paying opportunities.

Talk to your partner or co-parent

Have open conversations with your partner about creating a more equitable arrangement and financial plan. This might include your partner contributing to your KiwiSaver while you’re on unpaid leave or career break, sharing childcare in ways that allow you to stay working full-time and growing professionally, and making joint decisions that protect both of your long-term retirement savings.

Empower yourself professionally

Your choice of career and employer also plays a role in how the motherhood penalty affects you. Looking for employers who offer flexible working arrangements can make it easier to balance work and family without sacrificing income. 

You can also upskill or take on training opportunities to increase your earning potential. The more you maximise your income during your working years, the more you can contribute to KiwiSaver and reduce the impact of any career breaks.

Grow your financial knowledge and confidence

Building financial knowledge helps lessen the motherhood penalty. Understanding how KiwiSaver, investments, and budgeting strategies work means you can keep your retirement funds growing even while raising your kids. 

Learning about insurance and having the right cover in place adds a safety net, helping you avoid making early KiwiSaver withdrawals due to serious health issues that set you back financially.  

With sound planning, you’re better equipped to keep your retirement savings growing - and you don’t have to figure it all out by yourself. Policywise can provide expert KiwiSaver advice and insurance comparisons tailored to your situation. 

Contact us to explore strategies to protect your loved ones, secure your retirement, and reduce the motherhood penalty amidst career breaks, reduced working hours, and family emergencies.

Using insurance to protect your KiwiSaver savings

Issues that come out of the blue can make it harder for mothers to grow their KiwiSaver balances. If you or your family member faces a serious illness or injury, you may feel forced to suspend your savings or withdraw from your KiwiSaver. 

Having the right insurance in place before you need it ensures you have financial resources to draw upon, so your retirement savings stay invested for your future. Below are some insurance products and explanations on how they can protect your retirement savings.

RECOMMENDED READINGS

What is KiwiSaver? How it works, eligibility, contributions, & more

KiwiSaver withdrawal: Retirement, first home, hardship, and more

Health insurance for your family

Protect your KiwiSaver and your family’s future with Policywise

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Check out the reviews on our homepage for how other New Zealanders have found our service, because now is the time to get your retirement and insurance plans sorted. Give your family or someone you love the most outstanding financial support possible. Book a 5-minute callback with Policywise today; our service is fast and free.