Savings gender gap: how we can make KiwiSaver fairer for women
A potentially bleak retirement is on the cards for some women.
The 20% gender gap in retirement savings means single women without a mortgage-free home could arrive at 65 without the means to finance their golden years.
While the Government is making all the right noises about pay transparency and equity to address the gender gap, there appears to be no urgency to make changes to KiwiSaver.
Yet any delay to address gender inequity is costing women.
The 20% gender gap in KiwiSaver balances
Research conducted by the NZ Institute of Economic Research (NZIER), and commissioned by investment firm Kiwi Wealth, found a 20% gender gap in the average KiwiSaver balance between men and women.
The report attributed women’s disadvantage to taking time off work for childcare, the pay equity gap and low confidence in making KiwiSaver investment decisions.
The estimated financial impact of a one-year break in contributions is $15,100.
Yet, if a woman takes more time out to care for children, or takes up part-time work, she could be missing out on between $58,000 and $318,000, compared with if she took up full-time employment.
The NZIER research backs up a report by Te Ara Ahunga Ora Retirement Commission (the ‘commission’) last year. Its report found that on average men had 20% more money in KiwiSaver schemes.
The widest gender gap in the commission’s report was for women in their 50s, who on average had 32% less than men in their KiwiSaver funds. It was a similar story for women in their 40s, who on average had 30% less.
Retiring with no secure housing or savings
A potentially bleak retirement is on the cards for single women without a mortgage-free home.
Cynthia* rents in a small city in Aotearoa. She turns 68 in September, but she can’t afford to retire. She’s lived week by week for most of her life, so she couldn’t plan long-term.
“I plan on working until I can’t,” she said.
She works in a library – a career she retrained for in her 50s knowing that she couldn’t retire at 65.
While she has a KiwiSaver account, she was studying when the scheme was introduced in 2007 and was working part-time, so her contributions were minimal.
Cynthia has worked all her life – several part-time jobs when her kids were little, fulltime in hospitality when her kids were older, and then a stint in Australia where she worked as a carer until her then-partner started his cleaning business. She also helped care for her stepchildren while living in Australia.
When her relationship broke up, she returned to New Zealand and retrained to be a librarian.
While not having enough savings for retirement is a worry, she’s more concerned about housing.
“I’m relying on my landlady staying the same … and not getting kicked out or the rent going up.”
Cynthia’s rent is just under $300 a week, which doesn’t leave her much change from the pension.
While she is being paid some superannuation, she’s saving that for when she does stop working.
Cythnia is not alone in her worries about housing and financing her retirement.
Dr Claire Dale, Research Fellow, and Associate Professor Susan St John from the University of Auckland found that women are more likely than men to arrive at retirement without secure housing, and have less money saved, because of tending to work in caring roles and being paid lower wages.
While superannuation in Aotearoa is fairer towards women than pension schemes in Ireland and Australia, women are still more likely than men to be solely reliant on the pension, and less likely to have their own homes.
Research from the Research Evaluation and Social Assessment suggests that by 2053, almost 640,000 over-65s will be renting, including 326,000 renters aged 85 and over.
The current superannuation rate is $538.24 per week (before tax) for a single person living alone, while the average rent has jumped to $390 per week. While retirees may be eligible for accommodation benefits, it doesn’t leave much for life’s necessities, let alone account for an enjoyable retirement.
*Not her real name
Covid-19 and significant hardship withdrawals
Covid lockdowns have hit women’s wallets more than men’s, too. Because more women are in people-facing roles, such as hospitality and tourism, their jobs have been affected more than men’s, according to the report Women and Retirement in a Post-Covid-19 World by Dr Dale and Associate Professor St John.
This is backed up by employment data from Statistics NZ. Between the March 2020 and September 2020 quarters, 19,000 women were unemployed compared with 11,000 men. And in the underutilised workers category – those in part-time work who want more hours – there were 48,000 women compared with 36,000 men.
Increasing financial pressures brought on from Covid has also meant a rise in the number of significant financial hardship withdrawals from KiwiSaver.
In the year to 31 March 2021, 21,000 withdrawals were made averaging $7584 – up from 17,534 withdrawals the year before.
While it’s not possible to get a gender breakdown of who is making hardship withdrawals, based on the Australian experience, it’s more likely to be women.
The Australian regulator of banks, insurance and superannuation funds said A$30 billion was paid out in hardship grants to members as part of the Covid-19 response.
One in five women aged 25-34 made an early withdrawal application. Most early release applicants started with lower balances than other members.
As a result, the gender pension gap for women aged 25-34 increased from 21% to 45%. For older women (55-59), it increased from 44% to 51%.
Gender and ethnic pay gaps
One way to remedy the gender gap in KiwiSaver contributions is pay equity.
“We need to keep working towards closing the overall gender pay gap,” Retirement Commissioner Jane Wrightson said. “Being paid less than men not only has a real impact to our everyday costs but our ability to save for retirement.”
The national gender pay gap is 9.1%, but it’s even wider for Māori, Pasifika and Asian women.
In 2021, the Ministry for Women, Manatū Wāhine, calculated that Pasifika women are the worst off. The average Pasifika woman earns $5.98 less an hour than a man, on average, while a Pākehā woman earns $1.67 less than a man per hour. For Māori women it’s $4.07, and for Asian women it’s $3.50.
The Ministry for Women’s Te Mahere Whai Mahi Wāhine: Women’s Employment Action Plan released in June has pay equity and transparency as its top priority.
The pay equity work is being carried out by the Public Service Commission, while the Ministry for Women is working with MBIE on pay transparency. Yet there’s no time frame for when this work will be completed.
The Equal Employment Opportunities Commissioner Saunoamaali’i Karanina Sumeo is disappointed no time frames have been decided.
“Pay transparency will help us all,” the Commissioner said. “We know that secrecy around pay enforces sexism and racial biases and hides structural inequalities. We have legal and moral duties to eliminate this now.”
Other Government work towards a level playing field is under way. The 2018 amendment to the Employment Relations Act aims to give greater protection to workers and strengthen the role of collective bargaining to ensure fair wages and conditions.
The Fair Pay Agreement legislation has also been introduced to Parliament. This legislation will enable groups in the same industry or occupation to bargain collectively. The Government hopes to pass the legislation by the end of the year.
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Gaps in KiwiSaver data
There are big gaps in data which could reveal who is missing out on the benefits of KiwiSaver.
The University of Auckland’s Retirement Policy and Research Centre’s Pension Briefing said average and median KiwiSaver balances need to be broken down by gender, age, income and ethnicity.
“Understanding this data is key to addressing the wide gender and ethnic pension gaps,” the authors said.
Yet there’s no statutory requirement for the Financial Markets Authority (FMA) to collect or produce this data.
A spokesperson for the FMA said we’d have to go to each KiwiSaver provider to find out whether they hold the data.
Authors of the Pension Briefing paper suggest that a good gender representation could be compiled by an independent body from the top three or 10 providers.
We think it should be a requirement for KiwiSaver providers to hand over this data to the FMA so we can get a clear picture on who is missing out on the benefits of the savings scheme.
44% of women aren’t confident their KiwiSaver funds will be enough to retire on
How confident are you that KiwiSaver funds will be adequate to support you in your retirement?
43% of Māori aren’t confident their KiwiSaver funds will be enough to retire on
How confident are you that KiwiSaver funds will be adequate to support you in your retirement?
OUR DATA is from a nationally representative survey of 2323 New Zealanders, carried out in January and February 2022. Some respondents have identified with more than one ethnicity. Response numbers are shown in brackets.
Changes to KiwiSaver
There have been various reports over the past three years on how KiwiSaver could be improved, according to a spokesperson from the Ministry of Business, Innovation and Employment (MBIE).
MBIE is working with various government agencies and the investment sector to identify where improvements could be made to the savings scheme, before advising Government ministers on possible changes.
While there’s no time frame for this work to be completed, MBIE expects to provide initial advice to Ministers later this year.
The Retirement Commissioner’s review of retirement income policies is due in October.
How to make KiwiSaver fairer for women
To improve KiwiSaver, the University of Auckland’s Dr Dale would like to see KiwiSaver open to everyone, not only those in paid employment. For those in carer roles, voluntary contributions could be encouraged, or contributions made from the state.
Women may also be better served if KiwiSaver:
has automatic restarts after a year’s temporary suspension;
includes more education and encouragement;
carer credits for those taking time out from their career to look after family;
auto-enrolment into the scheme.
What employers can do to close the gender KiwiSaver gap
Retirement Commissioner Jane Wrightson said there’s more employers could be doing to help women save for their retirement.
Employers “could be continuing to pay KiwiSaver contributions while women are on maternity leave … another solution could be sharing contributions of the working partners across both parties”.
Wrightson would also like to see more education to catch women in their early careers and get them thinking about their long-term plans sooner.
“This could include contributing more in KiwiSaver earlier on in their careers and becoming more confident to look at things like investing in shares.”
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