What does retirement look like for women

By Dr Suzy Morrissey - Director, Policy, Te Ara Ahunga Ora, Retirement Commission

Almost 130 years on from the first Suffrage Day in New Zealand, women are still disproportionally worse off than men – the battle for gender equality rages on.

A range of factors play out across a women’s lifetime impacting their finances and culminate in less KiwiSaver savings, which combined with longer life expectancy, impacts women’s financial resilience and wellbeing in retirement.

This is a challenging problem to fix, but one that can be addressed with the same determination and consistency that our forebears showed in 1893 when New Zealand became the first country in the world to give women the right to vote.

Improving the financial situation in retirement for half the population of New Zealand requires a multifaceted approach. Te Ara Ahunga Ora, Retirement Commission has conducted a range of research to support the 2022 Review of Retirement Income Policies (RRIP). This work has highlighted low KiwiSaver balances for women and inequalities that need to be changed. Our report, “What does retirement look like for women?” provides detailed analysis of the current challenges that women face throughout their working lives and the impact that has on retirement.

Closing gender and ethnic pay gaps, and increasing levels of paid work for women by easing the unequal share of unpaid work, especially around the care responsibilities (that predominately fall to women) are issues that need addressing.

The gender pay gap is 9.2%, on average, but varies by ethnicity. Pasifika women earn the least relative to pakeha men.

Full time paid work allows women to make greater contributions to their KiwiSaver balances and therefore improve their financial situation in retirement.

However, one in three women in paid work only work part-time, and that may not be through choice. Underutilisation is a measure of the difference between the hours of paid work people are currently doing and the amount they would like to be doing. It includes the unemployed but also those who are working fewer hours than they would like.

The underutilisation rate for Pacific women is 18.3%, for wāhine Māori it is 19.2%, and for older women (aged 55-59 years) it is 18.7%. Increasing paid work for those who are underemployed could significantly increase New Zealand’s productivity.

While not all women’s experiences are universal, the disproportionate burden of unpaid work reduces women’s ability to undertake full time paid work (should they wish to do so), and to save money for retirement over their lifetime.

Breaking the gender bias with unpaid work - or alternatively compensating women for the time they spend in unpaid work – can be done through KiwiSaver contributions from the government or from employers or from partners.

In New Zealand, the majority of childcare is undertaken by mothers, rather than fathers. To recognise the time spent (by men or women) on childcare, the government could pay KiwiSaver on paid parental leave payments. Alternatively, some employers have started to maintain their employer contributions to employee’s KiwiSaver, even while they are on parental leave. And it is already possible to make voluntary payments into another person’s KiwiSaver fund – a partner who stays in paid work could make contributions while a partner takes time out to care. Similar consideration could also be given when people take time out to care for parents or whanau with disabilities, and again, such unpaid work is currently disproportionately undertaken by women.

Another pragmatic change would be to introduce an independent statutory entitlement for fathers to paid parental leave. With less than 2% of paid parental leave taken by fathers in the year ended March 2019; fatherhood continues to have a limited impact on men’s paid work, in comparison to women. This change would incentivise fathers to take a more hands on role with their young children, allowing parents to split the responsibilities of parental leave more fairly.

Similarly childcare costs are often considered against the potential salary earned by the mother. Improving the accessibility of good quality affordable childcare would significantly benefit mothers' and enable more to return to paid work. Affordability problems and balancing the cost/benefits of paid work could be achieved in New Zealand by expanding the current policy of funding childcare for over 3-year-olds for 20 hours per week to younger children and for more hours.

The data below reflects the ongoing need to focus on women’s KiwiSaver balances and preparedness for retirement:

  • Recent KiwiSaver data shows that women have on average 20% less than men. There are wider gaps for women in their 40s (30% less) and 50s (32% less).
  • Gender pay gaps persist through a women’s lifetime and are higher for older female workers. The average gender pay gap is 9.2% but at age 55 – 59 it is 13% and age 60 – 64 it is 15%. This disadvantages women, as they are less able to save more for retirement in their final years of paid work
  • Women, at age 65, are likely to have between 24 and 27 years of life expectancy and retirement to fund. Their longer life expectancy than men, and a tendency to partner with men who are older than them, means many women are like to spend more of their retirement living alone.

Other research released recently by Retirement Income Interest Group (RIIG) has shown that women are not necessarily more conservative than men in their investment choices. Instead, it is the size of KiwiSaver balance that impacts the investment category, with smaller balances invested in low risk / low growth funds, and larger balances invested in higher risk / higher growth funds. There is a role for financial service providers to ensure that appropriate advice is given to women, without unconscious bias regarding perceived risk appetite, and which recognizes their life expectancy.

During a women’s life the impact of many structural policy choices widen into a gendered income and pension gap in retirement. Personal income plays a significant role in women’s financial resilience and wellbeing and women’s lower earning impacts their resilience for the future and preparedness for retirement.

So, on the anniversary of Suffrage in New Zealand, given the advantages of supporting women to participate fully in the workforce, support their wellbeing in retirement and reaping the rewards for themselves and society – what is stopping us to push for this change?