Given what we already know about gender pay disparities, it’s hardly breaking news to know that KiwiSaver balances are pretty unbalanced across the gender divide but what exactly are the structural differences and which political parties are addressing this?
Did you know that women, on average, have lower KiwiSaver balances than men? Findings from Te Ara Ahunga Ora Retirement Commission in 2021 showed that the average woman’s KiwiSaver retirement fund is 20% lower than the average man’s. As of last month, this percentage has increased to 25%.
While the gender pay gap is fundamental to tackling gender inequality, confronting the long term consequences of pay disparities does not always naturally follow. But the presence of a gendered gap in retirement savings makes sense when you trace back to people’s working years – this is because KiwiSaver, as a retirement savings scheme, has a close relationship with the labour market.
When research has shown that women interact differently with the labour market compared to men, causal links between years of working and years of retirement start to become clear. If men, on average, earn more than women over a lifetime, then their KiwiSaver contributions (both employer and self-contributions) are likely to be higher.
Unpaid domestic responsibilities (housework, child rearing, etc.), which unequally fall on women, have been identified as a main reason for men being able to earn more than women and subsequently have more in their KiwiSaver upon retirement. Other drivers for this disparity include women being more likely to be in part-time employment than men and having less confidence and knowledge in making investment decisions, all of which impact the trajectory of long-term savings.
The Labour government has recently taken steps to address this gendered KiwiSaver disparity in Budget 2023, by “enhancing the KiwiSaver scheme for parents”. In this funding, the government will pay a matching KiwiSaver ‘employer’ contribution of 3% for those on paid parental leave.
While the number of men taking paid parental leave has increased since leave was extended to 26 weeks in 2020, women are still more likely to be the ones taking time off and this has significant consequences for their KiwiSaver balances. In fact, the New Zealand Institute of Economic Research (NZIER) found that a woman who takes one year parental leave from full time work will have $15,100 less in her KiwiSaver fund by the time she reaches 65.
Such an investment by Labour is an important step toward recognising the amount of unpaid work women do. It also contributes to conversations about how women are impacted differently, both economically and socially, and may help bring other disparities to light.
The government contribution, however, requires a co-contribution by employees as a way to incentivise those on paid parental leave to save for retirement. As a result, this condition may mean that lower income earners, who cannot afford self-contributions while on parental leave, will miss out on the government’s matching contribution.
The Green Party have commended this change to KiwiSaver, which ensures “parents continue to receive contributions while on paid parental leave”, though did not comment on the condition of individuals making their own contributions. Statements regarding this portion of the Budget were not made from other political parties.
Labour’s funding comes at a time when recent data from Te Ara Ahunga Ora Retirement Commission has uncovered that the KiwiSaver gender gap has now increased to 25%, with gaps present in every age band.
Women in their 40s and 50s still experience the widest gaps in this new research. Women in their 40s approximately have $10,000 (or 34%) less in their KiwiSaver balances than men, while women in their 50s have $14,500 (or 37%) less in their KiwiSaver balances than men.
The gender gap is also becoming more apparent in younger age groups, a trend which is concerning because of compounding interest; if women are investing less into their KiwiSaver than men, their funds have less time to grow. Research found a 7% gap increase for those aged 18-25, who now sit at 23% and an 8% increase for 31-35 year olds, who now have a gap of 27%.
The data showed that KiwiSaver literacy among women, such as fund choice, were not driving the increase. Rather, the socioeconomic factors of the gender pay gap, women taking parental leave and being more likely to be in part-time employment were still largely responsible for the average 25% disparity.
The way KiwiSaver interacts with individuals’ working years and retirement highlights how certain decisions made now will produce certain outcomes later in life. The link between the gender pay gap and the KiwiSaver gender gap raise bigger structural issues that are far too mammoth for one individual to tackle.
Rather, political parties need to pay attention to the myriad factors that result in this KiwiSaver disparity – from who undertakes the majority of domestic duties, to how these responsibilities directly affect the way women interact with the labour market – and implement initiatives (such as pay transparency) that have been shown to reduce the gender pay gap, which ultimately flows on to reduce the same gap in KiwiSaver balances.
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