Love the idea of a care credit, and one of the strengths of New Zealand superannuation for women is that its not linked to paid work.

New Zealand women’s problem: Less money, longer lives : Susan Edmunds, Aug 15, 2020

If you’re a woman planning for retirement, good news: You’re probably going to have a longer post-work life than the men around you.

But if you’re a woman planning for retirement, bad news: You’re probably going to have a longer post-work life than the men around you.

You’ll earn less throughout your life, earn lower investment returns and be encouraged by a world of advertising and social pressure to spend what money you do have – so you’re probably going to arrive at that longer retirement with less money available to fund it.

Despite the strides New Zealand women have made in society in recent decades, there is still a significant imbalance when it comes to the financial side of life.

There’s evidence that, right from the time they start earning, young women are on an economic back foot, and rarely catch up.

One of the problems is that, as a group, women earn less than men. They form a greater proportion of lower-paid sectors and roles, and there is evidence that when a particular job or industry becomes female-dominated, what it is paid starts to drop.

The gender pay gap was 9.3 per cent in the June 2019 quarter. That’s down from more than 16 per cent in 1998 but it has not moved much since 2017. That equates to about $12,000 a year.

Retirement Commissioner Jane Wrightson said working in lower-paid jobs and sectors and taking time off for caregiving, either having children, looking after elderly parents or both, pushed women as a whole into a position where they were demonstrably earning less than their male counterparts.

Karen Silk, Westpac customer experience hub general manager, said it was something that was seen in her organisation.

“We know we have a responsibility as a large employer to look at how we pay men and women. We did some research last year that confirmed men and women are paid equally for doing equal work. However, we also found we had a 30.3 per cent gender pay gap, which means the median man is paid 30.3 per cent more than the median woman at Westpac.

“That’s because our lower-paid positions like customer service have more women, while men are more highly represented in fields like senior management, finance and technology. So, for example, while a man and woman in the same role in technology would be paid the same, there are more men in those roles.

“We’ve made a range of commitments towards closing the gender pay gap. These include increasing the proportion of our top three tiers of management who are women to 50 per cent by September 2025.”

There is also evidence that, as well as often taking lower-paid jobs, women are less likely to be offered or negotiate for better rates of pay even when they are in the same or similar roles as men. International research earlier this year showed that 60 per cent of women said they had never negotiated their salary – and even new graduates ended up earning less than men who did, because of this.

KIWISAVER

Wrightson said one of the most effective things that a young woman starting out in the workforce could do was to get her KiwiSaver sorted.

“It’s the first and the easiest thing to do… something that gets you saving a bit of money every pay day is a good thing and there are the Government subsidies as well.”

But the gender pay gap means there’s also a retirement savings gap.

ANZ chief executive Antonia Watson said women’s balances were lower than men’s, on average, in all age ranges.

The biggest difference was in people aged 45 to 54, where women had balances almost a quarter lower than men’s, across all KiwiSaver schemes.

She said ANZ data showed 75 per cent of women stopped their contributions when they had a child. Some employers, such as ANZ and Westpac, have opted to continue to pay their employer contributions while an employee is on parental leave.

Wrightson said the Commission for Financial Capability had suggested a “care credit” be considered for KiwiSaver, which would help people to continue to save for retirement if they were out of the workforce due to family commitments.

“Things can be done if there is political will.”

The experts said that, within relationships and families, people should be having open and frank conversations about money – and women should not be afraid to advocate for themselves.

People should have their own money as well as joint funds, Wrightson said.

“The only thing I would say as an older woman is if you understand you are earning your own money for most of your life, look at it from that perspective.”

AMP New Zealand Wealth Management chief executive Blair Vernon said there was a need for each person to feel a sense of sovereignty over their own financial lives – whether that was through ensuring they had set up their KiwiSaver account to suit their own investing goals, or maintaining a transparent and open approach to management of the household finances.

“Women outlive men so it’s even more important to arrive at retirement with funds but there’s an issue of how every individual has a sense of their financial future. It’s not selfish… it’s still a subject that doesn’t get talked about.”

He said while people might choose different ways of managing their money, everyone needed to be able to take responsibility for their part in it.

That “leaning in” to money management also set a good example for children, he said. “I clench teeth when people say it should be taught in schools – do teachers have to do everything? Managing money, being responsible with money, that’s something they should start to pick up at home.”

INVESTING STYLE

Another thing that could work against women is that they were sometimes risk averse, said Watson.

ANZ data shows that high percentages of women are in less risky KiwiSaver funds, which tend to perform more poorly over an investor’s lifetime. Someone who spends 30 years investing in a growth fund could expect to end up with about twice as much as someone in a conservative fund, according to Kiwi Saver provider Milford Asset Management.

At ANZ, 13.47 per cent of women are in a conservative fund and 10.83 per cent of men. Just over 30 per cent of women are in a growth fund but 37.7 per cent of men.

“Women on average live longer than men and are therefore likely to need more money in retirement, so it’s really important they choose the KiwiSaver fund they think is appropriate for them, and we’d urge them to lift their contributions if they can afford it,” Silk said.

“Research consistently shows that women tend to be more conservative investors, change their investment strategy less frequently and are less likely to know how much they need to save for a comfortable retirement.

“Recently we conducted a survey that found only 33 per cent of women know how much they need to save for a comfortable retirement, compared to 44 per cent of men. Of those who do know how much they’ll need, only 44 per cent of women say they’re on track to get there, compared to 64 per cent of men.”

But Wrightson said in other forms of investing, that risk aversion could help women.Men were sometimes overconfident and invested more.“The more you invest, the more you can lose. Women get rid of poor stocks more quickly and hang on to the good ones for longer.”

STAYING ON TRACK

Life events tend to throw women off track to a greater extent than men experience.Women are still most likely to stop work to look after a child, and when they come back to work they earn less – sometimes valuing flexibility over career moves or greater pay. Data from Stats NZ showed that mothers earn 17 per cent less than fathers in New Zealand. If a relationship breaks down, it’s often women who take the biggest hit.An AUT study in 2018 found that women with children had a 19 per cent fall in income after their relationships failed, but in almost half of the separations the man was in a better position financially.

Getting back into the workforce, or finding career progression while juggling family commitments can also put a dent in a woman’s finances.

“What typified that first group,” said business school academic Michael Fletcher, “is that they had a reasonably good income on average before the separation but most of it came from the man’s earnings. After separating, although the women increased their average earnings, this was not enough to offset the loss of the ex-partner’s income. They were also more likely to have care of the children than were the men.”

The picture doesn’t get a lot rosier later in life, either.Shannon Barlow, at Frog Recruitment, said women were more likely to experience ageism while looking for work but were less affected when they were already in employment. When they were in a job, older women were seen as less of a threat in the workplace than men by their younger colleagues, she said.

“They’re often underestimated and that’s not a good thing but you can turn it to be an advantage.”Women were more concerned about the potential for ageism when they applied for a job, she said.

“There’s a perception that I’m going to come up against younger people – we’d always recommend to be able to put your best foot forward to focus on all the reasons that qualify them and highlight the advantages of being of a more mature age.”

HAVE CONFIDENCE

Financial coach Hannah McQueen said the messages women received about money were not helpful.A study in the UK found 73 per cent of money articles aimed at men were about investing but 90 per cent aimed at women were about the need to spend less.

“It’s just the norm but it feeds into their confidence… men are often categorised as the earners and women are the spenders.”There are only so many messages you can get about the importance of a new beauty product or a new outfit to look the part for work – combined with a “Please hide packages from my husband” doormat – that you can see before the messages start to sink in.

She said 90 per cent of women reported some unease with dealing with their finances – but it was an issue of confidence, not capability.“Women are just as capable, they don’t have the same confidence.”

She said women who came to her for help were often aware of what needed to change to get themselves or their families on track but were too quick to abdicate responsibility.“They need to fight the corner… if it’s going to be harder it just means you have to be better… it doesn’t happen by default.”

Watson said there needed to be more education and a change of mindset. Women needed to be empowered to make the necessary changes to get them on track. Product providers had a role, she said, to try to help with financial literacy and education. “But people have to want to listen.”