5 reasons women have less in their KiwiSaver (and what we can do to combat it) - Blog - BetterSaver
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5 reasons women have less in their KiwiSaver (and what we can do to combat it)

April 12, 2022

New research shows that women have 20% less than men in their KiwiSaver accounts. The gap increases with age - women in their 40s have 30% less, and in their 50s, 32% less.

Because KiwiSaver contributions are a percentage of wages, these statistics reflect the difference in earnings for men and women. Lower earnings mean lower personal contributions, lower employer contributions, and possibly missing out on the government’s tax-free contribution. Over a lifetime of work, that all adds up.

But why are women earning less than men? Here are five contributing factors.

Gender wage gap

The most obvious factor is the gender wage gap. Yes, still a thing in 2022. The June 2021 figures report a gender wage gap in NZ of 9.1%. While this is a slight improvement on the previous year’s 9.5%, the fact is that Kiwi women still earn almost 10% less than men for every hour of work.

The wage gap tends to be greater in higher paid jobs. A study from the University of Canterbury showed an average gender pay gap of $400,000 over a career for NZ researchers. After adjusting for performance, age, and field, they could not explain the remaining $200,000 difference. Women were paid less.

And it is shocking just how early in life the gender gap can start. A UK bank surveyed children between ages 8 and 15 (and their parents) and found that boys receive an average of $10 per week while girls get $8.89 - 12% less!

A year ago, we discussed the influences on the gender pay gap and the effects on lifetime earnings and the ability to save for retirement. Nothing has changed since then - it’s as crucial as ever for women to make sure they are in the right KiwiSaver fund and contributing enough to meet their goals.

Having kids means more part-time and unpaid roles

More women work part-time than men. Often it is because they tend to take more flexible, lower-paid work options to care for their children. This makes it more difficult for women to advance to higher-paid management and leadership roles, affecting their lifetime earnings and KiwiSaver balance.

Also, women do more unpaid work than men, inhibiting their ability to take on more demanding paid roles. Thanks to deeply embedded traditional gender roles, they are more likely to be the primary caregiver for children and take care of household chores. For instance, research shows that 15% of women claim they do all the housework, while only 1% of their male partners agree. This imbalance negatively affects earning abilities.

Having kids impacts a woman’s lifetime earnings in other ways. In NZ, women across all income groups are less likely to be employed after becoming a parent. Of those that return to work, their wages decrease by 4.4%-8.3%. Plus, monthly earnings do not return to pre-parenthood levels for ten years. When women take a break from work to have children, many don’t keep up their KiwiSaver contributions, so they miss out on employer contributions (at least 3% of wages) and government contributions (up to $521 per year) during this time.

Let’s not forget COVID

The last two years have had more of an impact on women in the workforce than men. In 2020, of the 11,000 people who lost their jobs, 10,000 were women. This is explained by over 70% of hospitality workers and 60% of sales being female, two industries hardest hit by lockdowns. Yet data from NZ’s Household Labour Force Survey shows that from March 2020 to March 2021, employment grew by 20,000 - with men accounting for almost 90% of that figure.

Of course, there is nothing wrong with men getting jobs. The point is that women who are not working are unlikely to be contributing to their KiwiSaver funds or saving in other ways.

Ethnic pay gap

Gender pay gaps are steeper for Kiwis of colour. Ethnic pay gaps have remained steady over 20 years. For men and women combined, Māori earn 82% of the average hourly Pākehā wage. For Pacific people, it falls to 77%. For women, the gap is even more - for instance, a Māori woman makes 5.5% less than a Māori man.

When comparing the wages of female Māori to all men in NZ, gender and ethnicity account for a 14% wage gap across occupations (it is over 20% for professional and management roles). Pacific workers are the lowest paid - the pay gap between Pākehā men and Pacific women in the public sector is 27%. Differences in wages due to ethnicity directly impact how much is saved in KiwiSaver, with women more affected than men.

Changes in the way we work

KiwiSaver was built based on the tradition of working the same job for 40 years, with a steady income and the annual government subsidy building a nice retirement nest egg. But we all know this is not what the workforce looks like anymore, especially since COVID turned everything upside down.

Formerly considered ‘non-traditional’ ways of working are now the norm. Before the pandemic, the number of freelancers in NZ was around 5% of the workforce. In 2021, it shot up to 13%, with the number of women reporting as self-employed up almost 14% from the previous year.

The challenge for freelancers is to actively manage their own KiwiSaver contributions. Setting up a regular, automatic transfer is simple. But make sure you’re contributing enough to meet your goals, especially since you don’t have the additional 3% employer contribution coming in.

KiwiSaver is critical in combatting retirement inequity

All of these factors have a compounding effect on women’s KiwiSaver balances. What this means is that women especially need to be strong advocates for themselves in looking after their financial futures.

The main thing to do now is to make sure you’re in the right KiwiSaver fund for your circumstances and that your contributions have you on track to reaching your goals. The type of fund you are in can mean the difference of tens of thousands of dollars, if not more. BetterSaver makes it easy with our Fund Finder Quiz - and it takes less than five minutes. You can feel confident that you are getting the most out of your KiwiSaver fund.