New study shows gender wage gap persists into retirement

The first KiwiSaver gender data, out today, shows women have 20 percent less in retirement savings than men, demonstrating how the gender wage gap during working years can influence retirement.

The new report, from Te Ara Ahunga Ora Retirement Commission, shows men's average balances are $32,553 compared to women's $27,061, based on nearly 3 million members.

The widest gaps in balances are between men and women in their 40s and 50s, a time of life when the power of compound interest starts to wane. On average, women in their 40s have about $10,000 (or 30 percent) less money in their KiwiSaver than men. Women in their 50s have about $13,000 (or 32 percent) less than men.

For those aged between 61 and 65, men's average savings balance is $13,149 higher than women's. Men in this cohort have an average savings balance of $61,606, compared to women's average of $48,457.

In total, there are more women members (51.3 percent) than men (48.7 percent) in KiwiSaver. This is true for each age band from 31 years and over. For ages up to 30 years, there are more men than women.

Te Ara Ahunga Ora director of policy Dr Suzy Morrissey said the disparity was expected and likely reflected the combined impact of the gender and ethnic pay gaps, time out of paid work, and more women than men working part-time.

"Given KiwiSaver is a retirement savings scheme closely associated with the labour market, this report provides robust data to further highlight the gender savings gap, which is apparent across all age groups," she said.

This study did not examine ethnicity, because providers did not collect that data. And KiwiSaver providers only coded data as belonging to men and women, so there was no data on non-binary and other genders.

But the picture is likely to be worse for people of Māori, Pasifika and Asian descent, especially women.

Stats NZ figures show a gender wage gap meaning that for every $1 a Pākehā man earns, a Pākehā woman earns $0.89, Māori and Asian men earn $0.86, an Asian woman earns $0.83, a Pasifika man earns $0.81, a Māori woman earns $0.81, and a Pasifika woman earns $0.75.

This effectively means Pasifika women are working for free for a quarter of the year and directly influences income-based retirement savings such as KiwiSaver.

University of Auckland Business School research fellow Dr Claire Dale wanted to see ethnicity data as well as the gender breakdown of KiwiSaver hardship withdrawals, because Australian figures show women's retirement balances were disproportionately withdrawn during the pandemic and she suspected the same was true here.

Dale said there were several changes that the government and employers could make to start to fix the gap, including employers voluntarily continuing paying into parents' KiwiSavers while they were on parental leave, and the government contributing the $521 tax credit for beneficiaries regardless of individual payments.

"One of the things we can do is encourage men to take paid parental leave, making it compulsory for firms to offer equivalent paid parental leave to men. It's where a policy change can make a huge difference."

Mind the Gap co-leader Dellwyn Stuart said women living longer combined with having less saved for retirement made them vulnerable in older age, and a gender lens needed to be brought to policymaking. Women also needed to be paid more.

"At Mind the Gap, we're campaigning for pay gap reporting so you can create some transparency and people can actually see which organisations have significant gaps," she said. "And what overseas experience shows is that businesses then work on closing those gaps. So there's little levers like that, that there's not a big change in law, but can make a significant change to what women earn.

"My daughters are now in their 20s and they're merging into workplaces where this exists ... it's just not okay. It's 2022... So we've got to believe we can change it, right? We've got to keep pushing."

NZ Super is fairer than KiwiSaver

Morrissey said KiwiSaver and New Zealand Super were the two public pillars in New Zealand's retirement income system, with New Zealand Super arguably fairer as it did not reflect gender and ethnic labour market discrimination.

"This highlights why New Zealand Super, the other pillar, is so important as it does not disadvantage women because of its universality … everyone will have that safety net.

"KiwiSaver… while not perfect when using a gender lens, is still a good scheme helping New Zealanders head into retirement in a better financial position."

Although KiwiSaver has only been around for 14 years, Morrissey said this study was an important baseline to see how savings could shift in the future.

The data also shows everyone was lagging behind in their potential retirement savings. Te Ara Ahunga Ora also asked the report's authors, actuaries Melville Jessup Weaver, to come up with hypothetical scenarios of a median wage invested over KiwiSaver's lifetime, compared to actual balances.

That exercise showed balances are lower than they could be across all age groups, part of which can be attributed to savings suspensions, delayed sign-ups, and first-home deposit withdrawals.

Morrissey said this reinforced that KiwiSaver should be a lifetime effort, as well as the importance of New Zealand Super, which was available to everyone regardless of gender and ethnicity.

"We know that people are using it more and more for first-home withdrawals, which is great, because we know that homeownership in retirement really provides a greater level of wellbeing than renting in retirement," she said.

"But [it's] really important to keep the KiwiSaver contribution going after the first-home withdrawal so that there is also retirement savings available for people."

Read more on retirement savings and the gender pay gap:

• Bad then, worse now: How Covid-19 will hurt retired women
• New Zealand pension system drops in world rankings
• A hidden consequence of the gender pay gap