Save like a feminist
Investing for women
KiwiSaver is a feminist issue because KiwiSaver is about wealth, and wealth is about standing in society.
It’s a concept captured by the famous Virginia Woolf quote: ‘‘A woman must have money and a room of her own.’’
It’s not just the adequacy of women’s KiwiSaver nest eggs that makes the national retirement savings scheme a feminist issue.
It’s also the fact that some KiwiSaver money is loaned to governments around the world that preside over countries with striking gender inequalities, at least one where it is legal for a man to rape his wife.
Investing in regimes that repress women
Around the world governments issue sovereign bonds. These are used by governments to fund their activities, and KiwiSaver schemes buy them.
Most bonds are issued by the heavily-indebted developed nations like Japan, the US, Great Britain and the Eurozone, but countries with poor human rights records, and laws and practices that repress women, also issue bonds. KiwiSaver schemes buy them, or buy holdings in overseas bonds funds that buy them.
The ASB KiwiSaver Balanced fund, for example, owns bonds issued by Qatar, which has been making global headlines for its treatment of foreign workers. But it is also a country where it is legal for a man to rape his wife.
The US State Department’s 2015 human rights report on Qatar noted widespread discrimination against women in the country, and found women imprisoned for ‘‘illegal pregnancies’’.
‘‘Authorities imprisoned women convicted for pregnancy out of wedlock’’, it said.
Turkey is another country which some KiwiSaver schemes buy sovereign bonds from. The US State department reported women’s groups were harassed by authorities with audits.
What they are saving
KiwiSaver provides the highest rewards for those already getting the highest rewards.
ANZ’s Laura Abba is a champion of women catching up in the super race, but it is hard when on average women earn just over $4 an hour less than men.
That’s not just a result of doing different jobs. Women are still over-represented in lower-paid ‘‘caring’’ industries, and part-time work.
With KiwiSaver, the amount a person earns dictates the amount they put in. Employers contributions are calculated as a proportion of their workers’ salaries.
That means women are in general contributing less, so there is less money for compound interest to work on.
Abba says women’s average balances are 22 per cent less than men’s and the gap continues to increase.
For KiwiSavers with two years to retirement, the gap is 26.5 per cent.
Unsurprisingly, this feeds into lower confidence among women about whether they would reach their retirement goals. Abba said around a third of women felt confident compared to just over half of men.
Career breaks
Women in Super network’s Helen McKenzie, says this is a biggie for women as the care of children in their early months and years falls heavily on women.
Abba says taking a five-year KiwiSaver contributions holiday results in roughly $50,000 less at retirement.
More than half the people on contributions holiday are women, despite there being more women than men with KiwiSaver accounts. There’s a double whammy as women really need bigger KiwiSaver nest eggs because they will live just under three years longer than men.
The effect can be compounded if their relationship breaks up, and they end up as a single unit playing career and KiwiSaver catch-up.
Fund choices
ANZ says women are more likely to choose conservative funds over growth funds. During the first nine years of KiwiSaver, growth funds have ruled. They have produced higher returns than balanced and conservative funds.
That’s helped worsen the gap between men and women’s average balances.
Abba says: ‘‘Our market research found only 10 per cent of women were prepared to accept some volatility in their investments for higher returns over time. As a result of being more risk averse, they are overrepresented in our conservative and default funds.’’
‘‘The proportion of women in a conservative fund is 35 per cent versus 30 per cent of males.’’
Abba says KiwiSaver providers need to do more to provide tools and strategies to enable women to take control and translate their goals into investment decisions.
Abba says: ‘‘As an industry we are more likely to appeal to more women if we ask them what they want out of life rather than asking them questions about products. Rather than asking women about how comfortable they are with volatility and picking a fund based on that, we can ask women what their investment goal is. For example, if a woman says she wants to save enough to ensure her two kids can go to university then the adviser can work out the investment timeframe and appetite for volatility and suggest a fund with the appropriate risk/ return profile to hit that goal.’’
NZ Super
You can’t understand Kiwisaver without reference to NZ Super. It’s universal, and enough to scrape by on, if you can access other benefits, or live somewhere incredibly cheap.
As women live longer, they get more benefit from NZ Super and, as a 2004 Treasury paper said: ‘‘Several features of NZ Superannuation have favourable impacts on women’’.
‘‘First, because there are no earnings-related contributions, women receive the same payments as men even though their average incomes are lower and they have fewer years in the labour force,’’ it said.
‘‘Second, the payments are financed from general tax revenues. Because of the progressive New Zealand tax structure, and the fact that women on average earn less than men and have greater life expectancy, women effectively pay less of the cost of NZ Superannuation and receive more of the benefit.’’
‘‘Third, because each individual receives the pension in their own right, changes in marital status do not affect the access to, or level of the pension.’’
‘‘Finally, the higher rates for those living alone mean older women are not economically disadvantaged by marrying younger and having a longer life expectancy and being more likely to face higher housing costs due to living alone.