Taking unpaid leave — whether for travel, study, family, or any other reason — raises a set of specific KiwiSaver questions. Here’s what happens to your contributions and employer match during unpaid leave, and how to protect your retirement savings during a break.
KiwiSaver Contributions on Unpaid Leave
When you’re on unpaid leave, there is no salary from which payroll deductions can be made. As a result:
- Employee contributions: stop automatically (there’s nothing to deduct from)
- Employer contributions: also stop — they’re calculated as 3% of gross earnings, which are zero on unpaid leave
Your KiwiSaver balance continues to be invested and earns returns during leave — it doesn’t sit idle. But no new contributions flow in from payroll.
Do You Need to Apply for a Savings Suspension?
Not necessarily. A savings suspension (contribution holiday) is required only if contributions would otherwise be deducted from your pay. During unpaid leave, there’s no pay — so no deductions occur naturally.
However, a savings suspension may still be relevant in these cases:
- Your leave arrangement includes some partial pay (e.g., you’re on reduced hours)
- You return from leave and want to pause contributions further
- You want to formally notify IRD that you’re on leave for record-keeping purposes
To apply, submit a KS6 form to IRD via myIR — you can pause for a minimum of 3 months and a maximum of 1 year per application, renewable as needed. The full rules are covered in the KiwiSaver contribution holiday (savings suspension) guide.
Voluntary Contributions During Unpaid Leave
Even with no payroll contributions, you can make voluntary contributions directly to your KiwiSaver provider via automatic payment or one-off bank transfer.
This is worth considering if you want to:
- Maintain retirement savings momentum during a long break
- Reach the $1,042.86 MTC threshold before 30 June and secure the $521.43 government contribution
- Recover the employer contributions you’re missing
Setting up a small automatic payment — even $50–$100/fortnight — during a long sabbatical can significantly reduce the impact of the leave on your long-run balance. Voluntary contributions are paid directly to your provider, separate from payroll.
The Member Tax Credit During Unpaid Leave
The government’s $521.43 MTC is available to anyone who contributes at least $1,042.86 in the KiwiSaver year (1 July–30 June), regardless of how those contributions were made.
If payroll contributions are lower due to unpaid leave, a voluntary top-up before 30 June can make up the difference. For example:
| Scenario | Payroll contributions | Voluntary top-up | MTC received |
|---|---|---|---|
| 6 months work, 6 months leave | ~$1,400 | $0 | $521 (already over threshold) |
| 3 months work, 9 months leave | ~$525 | $518 (top-up) | $521 (threshold met) |
| 12 months leave (no payroll) | $0 | $1,043 | $521 (full MTC) |
Illustrative based on $70,000 salary, 4% employee contribution rate.
Employer Contributions — What You’re Missing
During unpaid leave, you forfeit employer contributions for the duration of the leave. On a $70,000 salary, 3% employer contribution is approximately $2,100/year — or $175/month.
| Leave duration | Lost employer contributions | Lost employee contributions (4%) |
|---|---|---|
| 1 month | ~$175 | ~$233 |
| 3 months | ~$525 | ~$700 |
| 6 months | ~$1,050 | ~$1,400 |
| 12 months | ~$2,100 | ~$2,800 |
These are the direct contribution losses. Add investment returns you’d have earned on those contributions, and the long-run cost of a 12-month leave at 40 could be $5,000–$8,000 in forgone KiwiSaver balance by retirement.
This isn’t a reason to avoid necessary leave — but it’s worth understanding the real cost, and considering whether voluntary contributions can partially offset it.
KiwiSaver Insurance Add-Ons During Leave
Some KiwiSaver providers include life insurance or trauma insurance attached to your KiwiSaver membership. Unpaid leave can affect these add-ons:
- Premiums may be deducted from your KiwiSaver balance rather than payroll during leave
- Some policies require you to be “actively working” — unpaid leave may suspend cover
- Check your provider’s specific terms if you have KiwiSaver-linked insurance
This is particularly relevant for providers like Booster and Mercer, which have more integrated KiwiSaver insurance add-ons. If in doubt, contact your provider before starting leave.
Parental Leave vs General Unpaid Leave
Parental leave has specific KiwiSaver rules:
- Government-paid primary carer leave is treated as an income-earning period for KiwiSaver
- Employee contributions can continue during paid parental leave at your nominated rate (deducted from parental leave payments)
- Employer contributions are not required during parental leave — some employers pay voluntarily, but it’s not compulsory
General unpaid leave (sabbatical, travel, study leave, career break) follows the simpler rules above — contributions simply stop when pay stops. The rules for KiwiSaver on parental leave are more nuanced and covered separately.
Worked Example: 6-Month Unpaid Sabbatical
Situation: Priya, 38, earns $85,000. Takes 6 months unpaid leave to travel Europe. Currently contributing 4%, employer contributing 3%.
During leave:
- Payroll contributions: $0
- Employer contributions: $0
- Balance continues to be invested (projected to earn ~3–4% annualised during the leave period)
Voluntary top-up calculation:
- Projected payroll contributions for the year (6 months work): ~$1,700 (already above MTC threshold)
- MTC: full $521.43 — no top-up needed
- Optional: Priya sets up a $100/fortnight automatic payment to her KiwiSaver provider during leave = $1,300 over 6 months, partially replacing the $2,125 in missed employer contributions
Long-run impact: The 6-month gap at 38 costs approximately $3,500–$5,500 in forgone retirement balance by 65 (at 7.5% growth fund return), after accounting for the voluntary top-up.
Returning from Unpaid Leave
When you return to work, KiwiSaver payroll deductions automatically restart at your last nominated rate. Your employer recommences their 3% contribution.
If your contribution rate has changed or you want to update it on return:
- Submit a KS2 form to your employer, or
- Update via myIR under the KiwiSaver section
If you want to make a catch-up contribution to close the gap from your leave, make a one-off voluntary payment directly to your provider — there’s no limit on voluntary contributions.
Summary
| Aspect | During unpaid leave |
|---|---|
| Employee contributions | Stop (no pay to deduct from) |
| Employer contributions | Stop (0% of $0) |
| Savings suspension needed | Not required unless partial pay continues |
| Voluntary contributions | Available — set up directly with provider |
| MTC eligibility | Yes, if $1,042.86 contributed by 30 June (voluntary top-up may help) |
| Insurance add-ons | Check your provider — may be affected |
| Balance continues to be invested | Yes — existing balance remains invested and earning returns |