With August being Money Month, Sarah Lang has swotted up on the shockingly large gender retirement savings gap.
My inner raging feminist fired up when I found out that the New Zealand gender gap in retirement savings is 25%. In other words, men have on average 25% more in their KiwiSaver accounts than women do. Yes, really. And no, this isn’t all down to the gender pay gap, because it’s ‘only’ 8.6%.
So how the hell (I think a swear word is necessary) is the gender retirement savings gap nearly three times bigger than the gender pay gap? We’re looking only at KiwiSaver here, as that’s the main (and often sole) way we save for retirement, to supplement NZ Superannuation.
Dr Michelle Reyers, Policy Lead at Te Ara Ahunga Ora Retirement Commission, knows a lot about KiwiSaver and retirement savings – and also about the behavioural and psychological research that sits alongside financial decision-making.
So what, I ask, is going on?
“We hear about the gender pay gap being around 9%,” Michelle says, “and we think, okay, that’s not great. But we thought: how does that translate into what we’re seeing in retirement balances?” That was a question that hadn’t been asked and answered in New Zealand. “So it was something we needed to dig into.”
That’s why the Retirement Commission has produced three annual KiwiSaver Demographic Studies, carried out by investment-consulting firm Melville Jessup Weaver. Bear with the numbers for a sec, because they tell quite a story when it comes to gender and money.
The third annual report, released in May, contains data on 3,274,618 KiwiSaver members with total balances of $104.21 billion (as at December 2023). The average balance for a male ($36,605) is 25% higher than the average balance for a female ($29,291): that’s a gap of $7314. (This encompasses wage earners, self-employed and those currently not making contributions.)
And things aren’t improving over time. The 2021 report showed a gender retirement savings gap of 20%, and that jumped to 25% in 2022 (and has remained there). “We’ve been trying to understand what’s been driving that,” Michelle says.
And that’s the million-dollar (well, billion-dollar) question. The Retirement Commission began investigating potential explanations. It was a bit of a detective story.
“We asked ourselves,” Michelle says, “were women withdrawing more than men for hardship?” That’s when you apply to withdraw KiwiSaver money because of financial hardship. “But actually, we found that men had withdrawn more than women for hardship. Then we asked, ‘are more women than men on saving suspension?’” That’s when you suspend making KiwiSaver payments. Again, that wasn’t the case.
“We thought the only other factor could be the returns that people were getting on their funds at that specific time period analysed.” They knew there was a notion that women are more likely than men to choose conservative, less growth-oriented funds. “But we found that conservative funds had actually outperformed other types of funds during that specific time period. So the only remaining factor was the contributions going in.”
The Contribution Gender Gap
So, are women contributing a lower percentage of their salary than men were? Nope. Research found that, on average, women and men put the same percentage of their salary into KiwiSaver: 3.7%.
But for those who earn salaries and wages, the average dollar amount contributed to a man’s KiwiSaver account – via both employee and employer – is 36% higher over a year than the average amount contributed to a woman’s account. “That’s due,” Michelle says, “to the gender pay gap measuring the difference in hourly pay, women’s time out of paid work, their unpaid caring responsibilities, and more women than men being in part-time paid work. I was quite shocked at how high that number was at 36%.”
When ‘Time off’ = Money Lost
An important factor here is when women aren’t contributing to KiwiSaver.
Although gender gaps in retirement savings are present in every age group throughout women’s working lives, the widest gap is between men and women in their 40s and 50s. Why? Generally because, it’s usually in their 30s that many women take time out of paid work for unpaid childcare responsibilities. Other reasons are the gender pay gap, and the fact that one in three women in paid work only work part-time (and not always by choice, in a term called ‘under-utilisation).
“And,” Michelle says, “even if you go back into paid [full-time] or part-time work, those ‘missed years’ not contributing to KiwiSaver means you’ve missed out on that ‘compounding effect’” – as in, the interest you’d otherwise have earned. “You can’t catch up with men when you’ve missed out on those years!”
And we can’t blame KiwiSaver for that. “As a workplace-based savings scheme,” Michelle says, “KiwiSaver mirrors inequities that we always knew existed in the workplace. But it’s a starker reality now that we’re seeing dollar values of how big this gender gap in retirement savings is.”
Thankfully, she says, NZ Superannuation (currently $799 a week for couples, and $519 for a single person living alone) is a ‘non-contributory’ system (in some countries, superannuation is based on contributions over your paid working life). “It’s an awesome scheme for not reflecting the inequities of the workplace. That’s so powerful, because it means women aren’t discriminated against for not having been in paid work for their whole working lives.”
That’s as it should be! But women are still effectively discriminated against when it comes to what we can earn and thus what we can save.
In a short article called ‘What can we do to close the gender retirement savings gap?’, Michelle makes suggestions include prioritising KiwiSaver contributions, doing what we can to close the gender pay gap, fairly sharing childcare, and recognising unpaid labour. But are these things going to happen anytime soon?
In the hope that that’s possible, let’s keep having conversations about them.
Empowered, Not Frustrated
As women, learning about and thinking about the gender retirement savings gap can be irritating or infuriating. So how can we feel empowered rather than disengaging?
“I can understand that it can feel disempowering for women to have lower KiwiSaver balances than men,” Michelle says. But she says there are things we can do.
“You could engage with your employer about what they’re doing. For instance, say that it’s not ok that women are paid less than men. Is the company being transparent about its gender pay gap? Can you advocate for other changes within the company?”
“We also need to have discussions about money with our partners, partly so there’s an acknowledgment that women who take on care responsibilities generally face financial penalties.” And make sure no money is slipping through the cracks. Even if you’re not currently in paid work, keep putting at least $20 a week into KiwiSaver, and you’ll receive the maximum government contribution of $521 a year.
Here’s an idea: perhaps, even when you’re in paid work, your partner can make up for the gender retirement savings gap by putting extra money in your KiwiSaver account. Even if that doesn’t make the family richer, it can better reflect the woman’s contribution.
Societal Change That Can Help
However, it shouldn’t be all ‘on women’ and on families to bring about change. “As a society,” Michelle says, “we need to fix gender problems in the workplace, including women being paid less.”
“We need incentives set up to make sure that men and women are both easily able to go on paid parental leave, like in Sweden.” Sweden designates some parental leave exclusively for fathers, which are lost if unused. Oh, and in Sweden parental benefits are paid out for approximately 16 months, compared to New Zealand’s six months.
“We also need to ask harder questions,” Michelle says, “about how government policies, and workplaces, can support women who are taking paid parental leave.”
Something encouraging just happened, Michelle says. “As of July, if you continue to make KiwiSaver contributions while you’re on paid parental leave, the government will step into the shoes of the employer and match those contributions. It’s a step in the right direction.”
Losing The Gender Roles Of Saving
Is it common for women to contribute regularly to KiwiSaver, and know they’ll get superannuation, but otherwise rely on a male partner for longer-term financial decision-making including retirement planning?
“Traditionally that was the case,” Michelle says, “specifically for the generations now going into retirement. It was very much seen as the man’s responsibility.” But that’s changing, she says, particularly among women who stay single longer, or for good – and among women who have partners.
“And what we’re seeing in younger generations is an uprising in female empowerment about finances, helped in part by social-media resources that resonate with younger people. There are encouraging signs that women are becoming more empowered about their finances.”
Look out for Part 2 tomorrow about what you can do right now to maximise your retirement savings to help out your ‘future self’
