Women up to $318k worse off in retirement as gender pay and savings gap bites - report

Women are up to $318,000 worse off in retirement than men as the gender pay and savings gap takes its toll, a report has found.

The new report, commissioned by Kiwi Wealth and released by the New Zealand Institute of Economic Research (NZIER), found a gender gap in KiwiSaver, where the average balance for women is 20 percent lower than the average balance for men across all age groups.

They said the gap can be explained by four key drivers: the labour force participation gap, the pay equity gap, career gaps and changes due to motherhood, and self-reported low confidence and knowledge associated with KiwiSaver. 

"The savings setback attributed to motherhood, for example, has been measured and is considerable: the estimated financial impact of a one-year break in contributions, in terms of

the effect on KiwiSaver balances at age 65, was estimated to be $15,100," NZIER said.

"The overall effect could be between $58,000 and $318,000 if motherhood leads to part-time work or leaving the labour force, compared to full-time employment."

Closing the gap will require commitment and participation by the Government, businesses, other organisations, and New Zealanders, they said. 

The report recommends the Government can take action to close the gap by:

  • introducing legislation requiring gender pay gap reporting and pay transparency
  • developing a policy for KiwiSaver contributions for parents caring for children, regardless of gender
  • maintaining a watching brief on international developments to ensure that New Zealand remains well-ranked on retirement savings
  • considering whether more needs to be done to address the adequacy and sustainability weaknesses identified in an international comparison by Mercer and CFA Institute (2021)
  • partnering with KiwiSaver providers to improve financial confidence and knowledge among women
  • requiring transparency about who (age-sex groups) is doing what, so women understand the potential average returns relative to other fund types.

The report also proposed four major solutions: 

  • pay equity 
  • continuation of payments during maternity leave 
  • improving financial confidence and knowledge 
  • universal carer payments.

Kiwi Wealth said it commissioned the report to generate a clear picture of retirement savings in New Zealand by gender, and to present recommendations to policymakers, the industry, and Kiwis themselves. 

"We have a dual role as a KiwiSaver provider and wealth manager and as an advocate for all Kiwis," said Kiwi Wealth CEO Rhiannon McKinnon says.

"We have known for some time, including based on the data in our State of the Investor Nation report, that part of the gender gap in savings is driven by a gap in investment confidence, even though women are generally in charge of household expenditure and are as good at financial decision-making as men.

"Unfortunately, that lower confidence means women are significantly less likely to be happy in their lives at present and significantly more likely to be stressed about their ability to retire."

NZIER principal economist Christina Leung, who helped prepare the report, said the intent of it is to help policymakers by exploring the opportunities to get more equitable settings in place.

"The drivers of KiwiSaver inequity are well understood, and it is clear that more can be done to improve equity in KiwiSaver outcomes for women. Failure to act would be detrimental to the long-term wellbeing of women in New Zealand," she said.

The NZIER report also recommends businesses and other organisations:

  • offer employees the benefit of continuing their KiwiSaver contribution while on parental leave
  • partner with KiwiSaver providers to improve financial confidence and knowledge among women
  • assess and report gender pay gaps in your business, and work on eliminating them
  • actively work to eliminate unconscious gender bias
  • employ more women. 

McKinnon said that in commissioning and sharing this research, it isn't a criticism of any government since KiwiSaver has been an "extraordinary success" over the past 15 years. Rather, it shows that KiwiSaver needs to evolve as pressures continue to increase on the sustainability of national superannuation funding.  

"We know this is also the Government's position, with the Ministry of Business, Innovation and Employment currently conducting a comprehensive review of KiwiSaver's policy settings, with a focus on equity," she said.

"The first significant review of KiwiSaver policy settings in its history is an important opportunity to put in place more equitable policy that will close this gap and help more Kiwis, regardless of gender, enjoy a brighter financial future.

"Our goal in commissioning this report was to contribute independent analysis around gender equity in KiwiSaver, and we are sharing the findings and recommendations widely."