Pay gap hits retirement, too
We usually talk about the gender pay gap in terms of its effect on women's takehome pay. This research shows the flow-on effect on retirement savings. Simon Power of Westpac
Ashleigh Barrett-Young of Dunedin is becoming increasingly worried about her KiwiSaver account.
She and her husband withdrew all the money to buy a house a year and a half ago.
But since then, while his account has built up again, hers has not.
She returned to study and has found her balance had fallen because the account fees charged were higher than the returns the remaining money in her account accrued.
‘‘I know there’s a bit of fluctuation in the market at the moment, but it seems to be that the account fees keep coming out, and over the last year and a half have made a noticeable difference, given how low my balance is now,’’ she said.
‘‘And it is particularly disheartening because when we withdrew our KiwiSavers, mine was almost twice as much as my husband’s, because I had a higherpaid job before returning to uni.
‘‘So now mine is about $1800, which is just the balance that we weren’t allowed to withdraw, and my husband’s is over $7000.’’
She is in a BNZ growth fund and said she had considered moving to a cheaper option but liked the security of being with a big bank.
New research from Westpac shows many women are in the same position as Barrett-Young.
Its survey showed half of women had less than $10,000 in their KiwiSaver funds, compared to 35 per cent of men.
Men were more likely to have investments other than KiwiSaver, more likely to have estimated the amount they needed for retirement and more likely to contribute more to KiwiSaver.
Twelve per cent of men who responded to the survey were contributing 8 per cent of their pay to KiwiSaver compared to 8 per cent of women.
‘‘We usually talk about the gender pay gap in terms of its effect on women’s take-home pay,’’ said Westpac NZ general manager of consumer banking and wealth Simon Power.
‘‘This research shows the flowon effect on retirement savings. Simply put, it appears men have more income available to set aside for retirement and this is impacting KiwiSaver balances.’’
He said he was surprised to see that women were behind on every metric surveyed.
More than a thousand KiwiSaver members from various schemes were surveyed.
Four per cent of women reported having more than $50,000 set aside in KiwiSaver for their retirement, compared to 13 per cent of men.
Additionally, 24 per cent of women reported making contributions to KiwiSaver above the minimum rate of 3 per cent of their pay, compared to 31 per cent of men.
‘‘What we’re hearing is that more men have larger amounts of money put aside, and are contributing to KiwiSaver at a higher rate, than women,’’ Power said.
‘‘Furthermore, 52 per cent of men told us they had other investments to help fund their retirement, compared to just 39 per cent of women.
‘‘It’s a worry when you consider a woman born in 2000 has a life expectancy of 92 years, compared with 89.6 years for a male born in the same year. Women need more money in retirement, not less.’’
Power said the Government was doing a good job in terms of raising awareness of the need for retirement savings, particularly through the work of the Commission for Financial Capability.
But he said big corporates had an obligation to play their part in raising awareness.
Power encouraged women who took time out of the paid workforce to continue to contribute to KiwiSaver, if possible.
‘‘Of course, money can be tight after the birth of a baby. But every
$1 contributed will trigger a 50c contribution from the Government, up to a maximum of
$521.43, through the member tax credit.
‘‘Another good tip – and this applies to men as well – is to make sure you are in the most appropriate type of fund, based on your appetite for risk and how soon you’ll need to make a withdrawal from your KiwiSaver account.’’
Twenty-five per cent of women said they had worked out how much they might need in retirement, compared to 38 per cent of men.
What can you do?
❚ Make sure you’re in the right type of KiwiSaver fund for your circumstances
❚ Consider the impact of fees. If you have a low balance, a cheaper fund may be better.
❚ Make voluntary contributions if at all possible, even if you’re not working.
❚ Try to put in at least $1042 a year to get the full contribution from the Government.
❚ If one partner is working and the other isn’t, set up an automatic payment from the salaried partner to the KiwiSaver account of the one off work.