As New Zealand’s voluntary retirement savings scheme, KiwiSaver has been instrumental in helping Kiwis, well, save.
It’s not helping all Kiwis save the same, though. In July 2023, the Retirement Commission reported that the KiwiSaver gender gap had increased by five per cent in a year.
As of the end of 2022, men had 25 per cent more money in their KiwiSaver on average. So why is this gap widening, and what can we do about it?
The first significant contributor to gender inequalities in KiwiSaver is the persistent gender pay gap in New Zealand. On average, women continue to earn less than men for similar work.
According to Stats NZ data, the gender pay gap in New Zealand in 2023 was 8.6 per cent. This means that women earned 8.6 per cent less than men on average for the same work.
“In 2023, the Public Service gender pay gap using median pay was 5.8 per cent. This is similar to previous years (it was 6.8 per cent in 2022, 5.6 per cent in 2021, and 5.8 per cent in 2020) but still substantially below the 2018 figure of 10.7%.
The gender pay gap using median pay for the entire New Zealand workforce, as reported by Stats NZ, was 8.6 per cent in 2023, down from the 9.2 per cent reported for 2021.”
This figure decreases from the 9.2 per cent gap reported in 2021. The gap varies across industries and occupations and considers factors like race and ethnicity, education, age, and geographic location.
Per the Ministry for Women, the gender pay gap persists despite laws outlawing discrimination in wage rates between men and women performing the same job. This suggests that systemic issues may be contributing to the persistence of the pay gap.
This pay gap’s implications extend to KiwiSaver contributions, as contributions are based on a percentage of income. Lower incomes result in smaller contributions, ultimately leading to a gender retirement savings gap.
Employment New Zealand says that “in 2022, research has shown men earn on average 10 per cent more than women in New Zealand. Across the country, women are under-represented in higher-level jobs.
“In fact, many women are employed in industries where more than 80 per cent of the workers are women. These occupations tend to be lower paid.”
Factors contributing to the gender pay gap include biased decision-making, the value put on women’s jobs compared to men’s, that women are more likely to be grouped into a narrow range of jobs, and that more women combine primary caregiving with part-time work, as one example.
During career breaks, individuals may not contribute to KiwiSaver, leading to a reduction in their retirement savings, as another example. These societal and professional hurdles add up, and we see this reflected in KiwiSaver accounts.
Employment New Zealand further reminds us gender inequality affects everyone. “Both men’s and women’s experiences of employment can be affected by gender. Women’s earnings may be lower, and men may have less employment flexibility and be expected to work longer hours.
“Across the country, women are under-represented in higher-level jobs. In fact, many women are employed in industries where more than 80 per cent of the workers are women. These occupations tend to be lower paid.
“The opportunities and treatment of men and women workers are closely interrelated. Pay and employment equity cannot be achieved for women or men unless the ways gender is affecting employment are identified and addressed.”
The Retirement Commission looked at more than three million KiwiSaver members, with data representing about 94 per cent of the total member base. The gender gap is present in every age group category in the data, and it’s widening. Larger gaps have opened in younger age groups as well, which signals that this problem is only intensifying, and it is sure to be at the forefront of minds in years to come.
The KiwiSaver gender gap for 18 to 25-year-olds widened 7 per cent to 23 per cent, and the gap for 31 to 35-year-olds increased 8 per cent to 27 per cent.
The Retirement Commission’s director of policy and research, Suzy Morrissey, emphasised the importance of addressing this issue for future generations.
The widening gap at younger ages will exacerbate compound interest inequities. As each dollar invested earlier can grow exponentially over time, women’s lower balances compared to those of men are likely to remain lower throughout their lives without intervention.
As KiwiSaver is a voluntary long-term savings scheme designed to help individuals save for retirement, it is concerning that one segment of the population is falling behind in accumulating wealth for their future.
Thinking of age, women tend to live longer than men, which means they require more significant retirement savings to maintain their quality of life in old age. Yet, due to the aforementioned factors, many women end up with smaller KiwiSaver balances, putting them at a disadvantage during retirement.
Another factor is that men are more likely to be financially risky. Brooks et al., in “Experience wears the trousers: Exploring gender and attitude to financial risk,” say that not only are “men more risk tolerant to women” but that “specifically within the financial context, the finding that women are more risk averse than men appears universal.”
The researchers couldn’t find “a single study strongly suggesting the reverse”. Further, women are more concerned about losses than men: “This corroborates earlier research suggesting that men are more risk tolerant than women when lotteries are framed as gains, while the reverse pattern emerges when lotteries are framed as losses (Schubert et al., 1999).”
How genders interact in decision-making processes has a strong impact on the final outcome. Balachandra’s 2020 report “How gender biases drive venture capital decision-making: exploring the gender funding gap” found that 93 per cent of venture capitalists are men, and men founders raise almost 50 times more venture capital than women, so biases against women are common in the field and this has significant flow-ons into other industries. “If there were more women VCs, more women entrepreneurs would be funded,” the report says. All of these factors show themselves in data such as that of KiwiSaver.
Addressing the gender pay gap is crucial, as well as looking beyond KiwiSaver and considering the bigger picture at stake. Encouraging employers to implement transparent pay practices and promoting pay equity will help close the income disparity that feeds into KiwiSaver imbalances. Promoting flexible work arrangements can help both men and women better balance career and caregiving responsibilities.
This could reduce the career interruptions faced by women, allowing them to make more consistent KiwiSaver contributions. Providing accessible financial advice tailored to individual circumstances can help people make investment choices that align with their retirement goals and risk tolerance.
The New Zealand government can consider policies that specifically address gender inequalities in retirement savings, such as subsidies for women with unique situations, considering the cost of parenting and making noise on what it actually takes to raise a family, or initiatives to boost KiwiSaver contributions during career interruptions.
Gender inequalities within KiwiSaver are a complex issue that requires a multifaceted approach to address effectively. Noting the unique challenges faced by women in terms of income, career interruptions, and investment choices is the first step toward creating a more equitable retirement savings landscape.
Closing the gender gap in KiwiSaver is not only a matter of social justice but also essential for the financial security and well-being of all New Zealanders for years to come.
