Is there a gender gap in KiwiSaver?
A ‘male lens’ on the design of the retirement savings scheme overlooked unequal pay and caregiving roles, investment industry told. Rob Stock reports.
Changes must be made to ‘‘gender blind’’ KiwiSaver to make it fairer for women, powerful women in the investment and banking industry say. ‘‘Women do not have the same worklife expectancy as men, and many, many of them will have 10 to 15 years out of the workforce looking after children or older grandparents,’’ social justice campaigner and academic Susan St John told the Financial Services Council conference last week.
‘‘That then puts them at an incredible disadvantage when retirement savings are tied to paid work.’’
NZ Super was a universal basic income for over65s, and the benefits of KiwiSaver were tied to paid work, and that meant on average better outcomes for men than women.
‘‘Women in New Zealand are extremely fortunate and really, really well-served by the basic structure,’’ St John said.
‘‘Nevertheless, there are things in KiwiSaver that have been designed with a male lens,’’ she said.
Government KiwiSaver incentives, called member tax credits, favoured people who spent more of their lives in the workforce, and those on higher incomes, and should be re-examined with a gender perspective to make them fairer for women, she said.
‘‘When women aren’t in the workforce for 40 years, why aren’t they entitled to work until after 65 and still get the subsidies, for example,’’ St John said.
Another change she said would help women would be reinstating the $1000 kickstart, which was abolished by the National Government in 2015.
The taxpayer-funded Commission for Financial Capability, headed by retirement commissioner Jane Wrightson, also has recommended changes that would make KiwiSaver fairer for women.
These include introducing ‘‘care credits’’ so people weren’t penalised for time out of employment while raising children, or caring for sick relatives.
The commission supported phasing in employer contributions for over-65s still working, and replacing annual government tax credits with more generous payments of up to $2000 a year on contributions for a limited period of time for each saver – for example, the first 12 years a person was in KiwiSaver.
The suggestions were prompted by data showing that while men and women had a similar rate of KiwiSaver membership, women were more likely to not be making regular contributions.
St John and the commission are not alone in calling for a KiwiSaver feminist revolution. Kristen Lunman, general manager of fastgrowing DIY share investment service Hatch, says many features of the modern world have a subtle, often-unrecognised gender skew.
‘‘Gender-blindness in product and tech culture has resulted in the creation of many products designed with ‘one-size-fits-men’ in mind. Car safety features are designed around male test dummies, so women are nearly 50 per cent more likely to be seriously hurt in a collision,’’ she says.
‘‘Speech recognition software is trained on recordings of male voices, so Google’s software is 70 per cent more likely to understand men. This less-than-optimal approach to design even applies to retirement. Even retirement forecast tools are designed with men’s life and career spans in mind. This includes KiwiSaver.
‘‘New Zealand sits in an enviable position when it comes to being a woman. We’re in the top 10 countries to be a woman, according to a worldwide report that looked at literacy rates, workforce participation, political rights, and life expectancy.’’
However, women are disadvantaged when it comes to retirement savings, Lunman says. Studies here have shown that women end up with close to 20 per cent less in savings than their male counterparts.
‘‘Female-dominated fields tend to be lower-paid, females are under-represented in higher-level jobs, and it’s harder for females to re-enter the workforce after childbirth. This leaves us with around a 9 per cent gender pay gap.
‘‘Women do the majority of caregiving, live longer, and have lower contribution rates to retirement savings, all of which serve to exacerbate this wealth gap.’’
KiwiSaver has become the most widely held voluntary savings scheme and currently holds $62 billion in funds under management, Lunman says.
‘‘There are some brilliant incentives to help us along our way, but they don’t factor in the realities of being a woman because they’re generally coupled with paid employment, like compulsory employer contributions and government tax credits which are easier to get with a pay cheque.
‘‘But paid employment isn’t the only productive activity: unpaid care has long been discounted, overlooked, and taken for granted.
‘‘This unpaid care is vital to our societies – it creates strong families, healthy children, and saves the government from spending more on aged care, social services, and childcare. It shouldn’t be this way, and it doesn’t have to be.
‘‘It’s time to rethink KiwiSaver incentives and improve those not dependent on being in paid work. Women who must step out of the workforce to care for children or ageing parents could be able to collect government contributions while they’re on a ‘caregiver’ contribution holiday.
‘‘Retiring well should be a universal right, no matter your gender.’’
Rebecca Thomas, chief executive of Mint Asset Management, says KiwiSaver has become an important part of the New Zealand retirement income system, which is comparatively fairer for women than in many Western countries.
‘‘New Zealand Superannuation is beautifully simple and equitable, particularly from a gender perspective, but is now inadequate for a comfortable retirement, hence the introduction of KiwiSaver as a supplement in 2007,’’ she says.
‘‘KiwiSaver was a workplace scheme, so to a large degree reflects the world of work, and the known disadvantages for women resulting from their over-representation in lower-paid jobs, parttime work, and, most significantly, breaks from paid employment for child-raising or caring for dependants,’’ she says.
Even KiwiSaver’s fees are charged in a way that penalises people on lower incomes.
‘‘Fees are not tiered for low balances, resulting in the erosion of the pot and the endowment effect of regular contributions being reduced,’’ Thomas says.
‘‘Young people, low earners and women typically make up this group.
‘‘De-linking KiwiSaver from being a workplace scheme has already happened. Children can join, over-65s can enrol, the self-employed can use the scheme, and it can utilise regular savings or lumpsum contributions,’’ she says.
‘‘So, why not see if we can make the system fairer by compensating for some of the workrelated disadvantages, which affect women, low wage earners and the self-employed?
‘‘This could be done using the former kickstart payment as a buffer against the impact of fees on low balances, tax incentives or other types of booster payments such as ‘care credits’, which are designed to compensate for the ‘missing years’ of unpaid work,’’ she says.
Thomas hopes that the Covid-19 pandemic and lockdown will have changed some perceptions on the value of unpaid work.
‘‘I hope that the enforced juggling of home and work life, including childcare because of the Covid-19 lockdowns will change our perspectives on these priorities and how to value them,’’ she says.
‘‘KiwiSaver is still relatively immature and will become much more significant over time. Although it has been tinkered with since inception it is still quite simple and free of tax complexity and therefore distortions, minimum investment thresholds and, importantly, provides no disincentive for continued saving.’’
She was therefore cautious about making changes to it.
‘‘We have a retirement savings gap but it is nowhere near the 40 per cent gap between men and women in similar developed markets overseas,’’ she says.
‘‘In markets where retirement savings are predominantly left to individuals using workforce earnings, rather than state provision, the gaps are greatest because the system mirrors the position in society overall.
‘‘Personally, I would leave the system alone as it is not broken, allow it to grow and deal with issues like paid childcare outside of the retirement sphere. This in turn would improve the participation rate of women further, increase productivity, and increase workplace savings.’’
‘‘Women do the majority of caregiving, live longer, and have lower contribution rates to retirement savings, all of which serve to exacerbate this wealth gap.’’ Kristen Lunman General manager of share investment service Hatch