What can we do to close the gender retirement savings gap?

Good news. The gender retirement savings gap hasn’t widened in the past year. New research released from our team at Te Ara Ahunga Ora Retirement Commission in May found it remained fixed at 25%, meaning the average balance for a male is 25% higher than the average for a female, a gap of $7314. 

This follows a report by the New Zealand Policy Research Institute at AUT in April, which revealed a 36% gap between the amount men and women are putting into KiwiSaver, indicating this gap isn’t going to close any time soon. 

The retirement savings gap is much larger than our gender pay gap, which currently sits around 9%. So why is it so large, and what types of things could we do to combat it?

I spoke to Dr Michelle Reyers, our Policy Lead at the Retirement Commission, who has spent more than 10 years researching financial decision making with a focus on behavioural aspects connected to these decisions.

She shares some practical steps we can take to make retirement saving more of a level playing field. 

Fairly share childcare

We’ve come a long way in breaking down traditional gender roles in parenting, but we still often see the lion’s share of mothers making career sacrifices for childcare. 

Research from Motu has found that men’s hourly wages aren’t significantly affected by being parents, whereas women face 4.4% lower hourly wages after having children. This discrepancy gets bigger the longer a woman stays at home, with those who were out of paid work for more than a year experiencing an 8.3% wage penalty. 

Around 2% of men in New Zealand currently take paid parental leave. Dr Reyers says childcare is a key factor impacting mothers’ earning capacity, and this could be eased if fathers were more supported to take on these responsibilities. 

“Whether it’s taking time off after a baby’s born, or working part time to juggle childcare and afterschool responsibilities, we often see women taking a larger share of this responsibility. 

“A great way we have seen this combatted is through employers introducing family-friendly policies. Whether it’s supporting fathers to take parental leave, or offering more flexibility for parents juggling work and childcare demands, opening these conversations can help to break down these gender assumptions.” 

In recent years, several New Zealand businesses have stepped up with these types of policies, for example Unilever New Zealand introduced a gender neutral paid parental leave policy offering 16 weeks’ paid parental leave to either parent in 2023. As a result, they then saw an equal number of men and women taking paid parental leave. 

Policies like this, as well as open conversations between couples and employers as to who will take on these roles, can help to even out these inequalities.  

Prioritise KiwiSaver contributions

Throughout our lives, we’re all likely to have a moment or two when we question whether we can afford to keep contributing to KiwiSaver. 

I encourage you to reframe the question to consider ‘Can I afford not to contribute to KiwiSaver?’ A year spent not contributing to KiwiSaver could cost your future self tens of thousands of dollars. 

The Sorted KiwiSaver calculator can show you what you’re on track to have in your KiwiSaver by 65, and how that could be impacted by a pause in contributions.  

Recognise unpaid labour

In addition to childcare, women tend to take on a disproportionate burden of unpaid work, which may make them more likely to work part time. 

Dr Reyers says running the administration of a household or caring for sick or older family members can have a significant impact on a person’ s ability to save for retirement. 

“One in three women in paid work are working part time and 70% of part-time workers are women, and that’s not necessarily through choice. We know that full time paid work allows women to make greater contributions to their KiwiSaver balances and therefore improves their financial situation in retirement. 

“Supplementing KiwiSaver contributions from either the government, employers or partners can help to limit the impact of taking time out of paid work on eventual retirement savings.” 

Mid-2024, the Government will make a 3% contribution to new parents’ KiwiSaver while on paid parental leave, provided they continue their own KiwiSaver contributions.   

Continue crushing the pay gap

The gender pay gap is currently 8.6%, and significantly higher for wāhine Māori, Pacific and Asian women, and disabled women.  

Dr Reyers says normalising conversations about pay and pay gaps can encourage greater transparency and change. 

“We know that about 20% of the gender pay gap in New Zealand is caused by differences in education, occupation choice, age, type of work and family responsibilities, but the remaining 80% can’t be easily explained. This leads us to believe it is caused by behaviour, attitudes and assumptions about women in work, including unconscious bias and discrimination.” 

Consider KiwiSaver in divorce and separation

People often think of KiwiSaver as linked to them and their partner’s personal work, but it’s important that KiwiSaver accounts are included in a separation for things to be divided up fairly.  

People tend to overlook this, but KiwiSaver should be treated the same as any other investments or assets and be part of the conversation.  

Dr Reyers says that the majority of people fail to take KiwiSaver balances into account when dividing assets, despite contributions made during the relationship being considered relationship property.   

“We did some research last year which found that 25% of people included KiwiSaver when dividing their assets, while 65% took bank savings and other investments (including property investments) into account.” 

It’s a good idea for both parties to talk to a lawyer if you’re going through a divorce or separating from a long-term relationship, to make sure you’re both getting a fair deal.  

This article was originally published by the Waikato Times.