Payments can go on while on PPL

By Shelley Hanna

Add a comment

My partner and I are expecting a baby soon. I have been working in my current fulltime position since 2012. I am planning to take six months' maternity leave and then go back to work part-time. What will happen to my KiwiSaver contributions when I stop work?

Congratulations, you and your partner must be looking forward to welcoming your new baby into your home.

If you wish your KiwiSaver contribution to stop while you are on maternity leave, you do not need to do anything. If you wish them to continue you can apply for deductions to be made from any paid parental leave entitlement you receive.

Paid parental leave (PPL) is the government-funded entitlement paid to eligible mothers and other primary carers, including adoptive parents, Child, Youth and Family (CYF) Home for Life parents, whāngai, grandparents with fulltime care, and other permanent guardians.

Someone who has worked an average of at least 10 hours a week for any 26 out of the 52 weeks immediately before the baby's due date should be entitled to paid parental leave.

From April 1, 2016, PPL payments have been extended to cover more people and work situations. It now includes more casual and seasonal employees, employees with more than one employer, and those who have recently changed jobs.

The current maximum payment is $527.72 a week before tax. The amount you receive is calculated by taking the average of your highest 26 of the last 52 weeks of earnings, up to the date the child arrives.

Self-employed people can also apply for PPL. Even those who have made a tax loss over the past 52 weeks can still receive the minimum payment of $152.50 before tax. This is equivalent to 10 hours per week at the current minimum hourly wage.

You can decide whether or not you would like KiwiSaver contributions to continue while you are receiving paid parental leave, but there will be no employer contributions (as your employer will not be paying you).

PPL is administered by Inland Revenue. In order to receive the 18 weeks' entitlement you will need to fill out the IR880 form (you can download this from the IRD website).

You may already have done this. This is an eight page form including three pages of information on paid parental leave entitlements and five pages that you (and your employer) need to fill out.

On page two of the form there is a question about KiwiSaver. If you can afford it you can continue making contributions to your KiwiSaver account out of your PPL entitlement, but you have to request this option by filling out the KS2 form.

This is the same form that people wishing to join KiwiSaver should fill out. The IR880 and KS2 forms should be sent in together. If you have already submitted the IR880 form but would like your KiwiSaver contributions to continue while you are receiving paid parental leave, then send it to Inland Revenue with a covering letter (and follow up with a phone call just to be sure).

If you can afford it, continuing with KiwiSaver will not only boost your savings, it will also help towards member tax credits.

Before you make the decision to continue with KiwiSaver, work out your household budget once you go on maternity leave. You will need to adjust to the lower income, especially as six months' maternity leave will take you past the 18 weeks of PPL.

The arrival of a first baby is a very special time and you want it to be as happy and stress-free as possible.

- Shelley Hanna is an authorised financial adviser FSP12241. Her free disclosure statement is available on request by calling 06 870 3838 or go to www.peak.net.nz. The information in this article is general and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz

Get the news delivered straight to your inbox

Receive the day’s news, sport and entertainment in our daily email newsletter

SIGN UP NOW

Have your say

1200 characters left

By and large our readers' comments are respectful and courteous. We're sure you'll fit in well.
View commenting guidelines.

© Copyright 2017, NZME. Publishing Limited

Assembled by: (static) on production bpcf05 at 25 May 2017 16:40:02 Processing Time: 595ms