In the Budget, the government acknowledges that taking parental leave is one of the main reasons women fall behind, saying it will spend $19.6 million total operating to match KiwiSaver ‘employer’ contributions to people taking paid parental leave.
Last year a report by the NZ Institute of Economic Research (NZIER) commissioned by Kiwi Wealth (now part of Fisher Funds) found a twenty per cent gender gap in the average KiwiSaver balance of men and women.
The report attributed the disadvantage to women taking time off work for childcare, as well as the gender pay equity gap and low confidence of women in making KiwiSaver investment decisions. The estimated financial impact of a one year break in contributions was put at $15,100.
The NZIER report backed up a previous one by the Retirement Commission which also found that on average men had twenty per cent more money in KiwiSaver schemes.
The government says the new funding acknowledges the unpaid nature of childcare and incentivises recipients of paid parental leave to save for their retirement.
“This is further support for parents wishing to take time off work during the first critical months of their baby’s life following the 2018 increase of paid parental leave to 26 weeks.”
Financial Services Council (FSC) CEO Richard Klipin says the move is good news but won’t address the gap.
“New Zealand is facing significant headwinds as they head into retirement.The earlier we start the better and supporting parents when they are having their own children and out of the workforce by supplementing KiwiSaver is a very welcome development.”
Klipin says the FSC wants a proper review of KiwiSaver settings.
“Not only for parents but for all New Zealanders in the context of this being a 15 year old system, and the settings haven’t been adjusted in that time.”
He says there have been signs in the past that the government was interested but these were overtaken by events in the past few years. “Obviously we would welcome them to put it back as a priority.”
Jo Cribb, co-founder of the pay equity initiative MindTheGap also welcomes the news but would like to see the gender pay gap addressed as well.
“It’s a great step forward but we need to look at the bigger picture. Some of those savings can get eaten up through what happens in our workplaces.”
“A key thing the government needs to do is introduce pay transparency. That would potentially be the biggest contribution to women working full time.” A report commissioned by MindTheGap last year analysed public pay gap reporting impacts in seven countries and showed mandatory reporting can reduce gender pay gaps by 20 to 40 per cent.
Cribb also calls on investors to do more in this area under the auspices of ESG investing.
“I think pay transparency and treating employees equitably is a really important marker of the health of an organisation. I would say to investors, if they haven't got a handle on this, they probably haven't got a good handle on what's happening in the organisation. I'd love to see more investors asking questions about how companies treat their staff.”
Auckland University of Technology finance professor Aaron Gilbert says, while it’s a great step other factors are potentially driving more of the twenty per cent gap. He says women who have two or three children can spend a significant time outside the workforce, “and especially given that it's early on in your savings, that makes it a bit more of a critical period as well.”
But he thinks that while the government is trying to pull the levers it can, there are a couple of other issues that we need to address as well, including the gender pay gap.
“The reality is if everybody's contributing three per cent and men are getting paid ten per cent more, then over their lifetime in the workforce they're simply going to be putting more money away.
“The other is that women are often seen as being less confident and slightly more risk averse than men. So one of the consequences might be that they're not putting themselves into the higher risk funds.”
Sharesies joint CEO and cofounder Leighton Roberts whose online investment platform is poised to launch a KiwiSaver scheme in the coming months, says the government contribution will help ease cost of living pressures for parents and help them to build wealth for the future.
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