Women are worse off than men in retirement - and experts predict Covid-19 will make things worse. But changes now will ensure women are better off in the future. Should we reimburse retiring women for the gender pension gap?
It's Ana's* teeth that are one of her biggest worries about the future. When she was in a relationship, she could afford crowns and implants that cost thousands of dollars each. But now that she's 64, newly single and in a minimum-wage job, she has to get her teeth pulled when she chips or breaks one. She's already had two out and isn't confident about the lifespan of the rest.
She's lucky in that she owns part of a house, so she doesn't have to pay rent. But her relationship breakup has left her skint and fully reliant on NZ Super in the future, apart from a small amount in KiwiSaver.
"Luckily I've got lower expectations than other people my age," she says.
Ana is an example of the growing trend of women who arrive at retirement much poorer than men - a disparity that researchers say the pandemic has exacerbated.
"Globally, older women are the fastest-growing group in poverty," says Dr Claire Dale, a research fellow in the Retirement Policy and Research Centre at the University of Auckland's business school.
"This is huge. This is terrifying."
The 2022 Te Ara Ahunga Ora / The Retirement Commission's review of retirement income policy is about to get underway, with Minister of Commerce and Consumer Affairs David Clark releasing the government's terms of reference this week. The terms tell the commission what areas to explore for its next report. In 2022, this will include the impact of government policy on the retirement savings of women, Pasifika and Māori, as well as looking at retirement with cultural and gender lenses to understand the different impacts of those policies.
Other topics for the 2022 review are the adequacy of NZ Super on future retirees who are renting or don't own their home outright, and how diverse housing for seniors would have different impacts on retirement savings and income.
Across the OECD, women arrive at retirement much worse off than men. In New Zealand, KiwiSaver balances for those aged 55-64 are already almost a quarter lower than men's across all schemes, even though the scheme only started in 2007.
Because retirement savings depend on lifetime contributions, the gender pension gap is a distillation of every bias and disadvantage that some in society face throughout their life. It's worse for Māori and Pasifika women, who face discrimination not just on the basis of gender but also ethnicity.
The gap starts young, when, statistically, a woman's parents give her less pocket money and more housework than they would a boy. It continues when she's steered into lower-paid industries as a young adult; and then when she does the lion's share of unpaid household labour and childcare. And it continues when-or if-she retires, having been paid less than a man throughout her work life.
"This isn't necessarily an active choice by women to have lower retirement savings," Retirement Commission director of policy Suzy Morrissey says. "It's a function of how their labour market experiences have been over the years."
The gender pension gap highlights the exponential power of compound interest, a savings principle that's so powerful over a lifetime it's been dubbed "the eighth wonder of the world". Even starting small, early, frequent saving means compounding interest creates a snowball effect, resulting in an impressive nest egg for retirement.
But if women's contributions to their retirement funds are paused due to periods out of work for child-raising or family care, or they're small because of part-time work or low wages, the snowball's growth is stunted. That's evident in OECD poverty rates, which show that in New Zealand, 14 percent of women over 65 have an income that's less than half the median household disposable income. For men, the rate is less than half that, at 6.6 percent.
It's a trend reflected worldwide, too. Women over 65 not only suffer a higher poverty rate than men in every one of the 34 countries counted, but are worse off than the whole population in 61 percent of those countries, including New Zealand.
Māori and Pasifika fare worse. In 2019, New Zealand Māori Council research showed Māori women wouldn't be able to match the retirement savings of their husbands and partners nor non-Māori. That's attributed to the fact that Māori women spend considerable time looking after whānau, and Māori are more likely to go into retirement in debt. They're also less likely to own their own homes in retirement.
Covid-19 has only exacerbated these existing structural inequities. Of the 31,000 job losses due to the pandemic from March to September last year, 22,000 of those belonged to women, or 71 per cent.
Claire Dale, with Auckland University associate professor Dr Susan St John, wrote a paper examining how the economic burdens of Covid-19 fall disproportionately on women, making the gender pension gap worse.
"Women's employment in hospitality, childcare, cleaning of places like universities and schools that were all closed, work that can't be done remotely - it's primarily done by women," Dale says.
"At the same time, closure of childcare facilities made a lot of women unable to work. And then the thing that was particularly irritating was that the [150 government-funded] shovel-ready projects were geared entirely to male employment."
On top of this, financial pressures from lockdown meant more people withdrew money from KiwiSaver; in the year to March 2021, significant financial hardship withdrawals rose 42.8 percent to $159.3 million, up from $111.5 million a year earlier, and $107.9 million in 2019.
There were 21,000 hardship withdrawals, averaging $7584 each - up from 17,534 and an average of $6359 the year before. The statistics don't give a gender breakdown, but from their research, Dale and St John believe women will be disproportionately affected.
Dale tells RNZ evidence from Australia (she is seeking New Zealand data) "categorically" shows women's retirement saving balances were drawn down before men's when the Covid crunch hit households.
Although the gender pay gap in general has been a focus in the past few years, Dale says people forget that the disparity affects not just the weekly wage packet but has more of an impact later down the line, when it comes to the cumulative effect of retirement savings.
"It just doesn't occur to people," she says. "As a society, we don't talk about money. And we tend not to talk about the future. We need to talk about money, we need to learn about money and how to manage it. And we need to be thinking about our own futures."
Dale and St John's research shows the average woman has worked fewer hours in paid work because she's more likely than men to have volunteered in the community, done the physical and emotional labour for the household, and spent time caring for family and older relatives.
Their report outlines how, once a woman reaches retirement, having been paid less and thus saved less throughout her working life, she'll continue being worse off than a man.
They discuss how she's more likely to live alone, need end-of-life care for longer, and have a lower quality of life than he does. She's more likely than a man to rely on superannuation and have no other income. She'll be less likely to own her own home. There won't be as many employment opportunities for her, and when there are, they'll be lower paid. Her KiwiSaver nest egg will be, on average, 12 percent less than a man's-and even though she statistically has better savings habits, it won't be enough to cancel out the gap.
If she has a male partner and falls ill or develops high needs, he's more likely to put her into care; but, if their positions are reversed, she's more likely to look after him at home. If she's had a marriage break-up, she's more likely to be in hardship than men.
In a working and financial world designed with men's needs as the default, her employment, insurance and pension schemes also discriminate against her. Retirement forecast tools, including KiwiSaver, are designed with men's life and career spans as the default. Women's paid working lives are very different, Dale and St John point out.
They also say that the high cost of childcare means women often rely on grandparents so they can work; and most of that work is done by grandmothers, with women and grandmothers most likely to arrange it between them.
Enriching though it may be to care for children, it does not add any money to women's retirement funds. And the women going to work are further penalised just for having children; research shows that even if a woman is working full time, her salary is stunted. Men do not lose any salary when they have children; in fact, they say it often increases.
Hariata Hema's life journey would be typical of many women. The Wellington 66-year-old has a law degree and works at Age Concern, and says she has "a chequered history" of full-time work, part-time work, full-time volunteering, study, and caring-first as a solo parent of two, then later for her grandchildren in the United Arab Emirates. She also spent four years helping with the care of a dear friend with Alzheimer's.
It's important to her to contribute to her wider family and community. Caring is love, Hema says. But it doesn't pay for retirement.
"I'd say the large majority of women around my age have had a big chunk of their lifetime devoted to caring for others, whether it's children, parents-sometimes children and parents at the same time-and offering time to the community. We've all had it, it's a common experience.
"The thing about having breaks in paid employment is there's less in my kete of savings than I would have liked to have had. My experience has led to the conclusion that it really does make a difference, how much you've been able to work full time, and to put money away on top of daily living expenses for your retirement."
And aging is expensive, Hema points out. Like Ana, teeth are a preoccupation for her, now she's in her 60s. She says she's blessed she can afford the "humongous" dental bills she's getting now - not to mention thousands of dollars on hearing aids. Then there are glasses, which she's required to have to drive.
"If I wasn't currently in paid work, I'd be in trouble."
She is lucky in that she has a home, and a husband.
"My retirement fund is much less than my husband's. But I think it's to do with numeric literacy as much as anything else. I came to being a good saver quite later in life compared to him."
Money isn't the only issue when paid employment is replaced with caring duties. Ageism in the workforce is another issue, as women are perceived as less competent as they grow older.
"I've had lots of friends who for whatever reason have tried to get back into the workforce and found it extremely difficult," she says.
It's tempting to look for a simple answer, but the gender pension gap is complex.
The structure of NZ Super is not necessarily the issue, say Dale and St John, who point out that many aspects of its design are good for women. And Dr Jennifer Curtin, the director of the University of Auckland's Public Policy Institute, says it can be considered gender neutral in that it's as close as we've got to a universal basic income.
Instead, how women enter retirement is reflective of the value that has been placed on them and their work throughout their lives.
"There is this expectation that we will all have individual retirement savings," Curtin says, "and it's that component where the gender pension gap is such a pressing concern… linking it so explicitly to gainful employment, the term that the OECD uses, is really quite an old-school model."
Like so many other social problems, the elephant in the room when it comes to retirement is housing. NZ Super is based on retirees owning their home mortgage-free. The pandemic has made the housing crisis worse, pushing our house price-to-income ratio into even more wildly disproportionate territory, one of the highest in the world.
Stats NZ figures show home ownership is at its lowest in 70 years, from a high of about 78 percent in the 1980s to about 55 percent today. Home ownership rates has fallen in every region since 1991, and only 35 percent of Māori and 20 percent of Pasifika own their own homes.
Once upon a time, you might have expected people aged 55-64 would be mortgage-free; today, only 38 percent of people are, and the percentage of people aged 65+ with no mortgage has dropped from 78 percent in 2007 to 72 percent in 2017. In fact, 12 percent of people aged 65+ are still paying a mortgage, and the same number are renting.
There was also a time when even those who separated and halved their assets were likely to be able to use their share of the equity to buy a new property each. Now, not so much.
Nelson business owner Jacquie Walters, 51, says there's no way she can retire. She's not sure she can pay off the mortgage, for a start.
When she and her husband separated a decade ago, it took them six years to reach settlement. In that time, house prices soared almost out of her reach. If she and her husband had separated now, she says, she wouldn't have been able to buy at all. She fears for the futures of those younger than her, for whom the system wasn't designed.
"I think that the government needs to start by having a look at how people are actually living; formulate policy based on reality," she says.
She expects her two children, now 13 and 15, will still be relying on her financially for a long time, well into her 60s. And she also expects she'll be supporting her parents when she's in her mid-60s and beyond.
"A lot of my friends, contemporaries; we've had our children later," she says. "Many of us cannot imagine a time where we would retire."
Yet, even if it's hurt them financially, neither Hema, Walters nor Ana begrudge their care work.
"My personality is I like to be generous to those around me, in my world and in my community," Hema says. "I think it's an important thing that caregiving is recognised for what it is, which is love and service in the context of an existing relationship. That means that the person has a better quality of life-and everyone is better off if we are living our lives from our hearts and not our wallets."
"Who else would have done it?" Ana says. "It was appropriate that I did it, each time. It's what you do."
But the question of who is the default, "most appropriate" person to do this kind of care work isn't neutral; it's something that's collectively decided by society, which creates government policy. New Zealand still lacks the specific, ring-fenced paternity leave of other wealthy countries, making it harder for dads to become the main carer.
It could be argued Ana, Hema and others like them should have focused on an uninterrupted career, ensuring a firmer footing for retirement. Instead, their labour enabled others to work uninterrupted. This work is valuable, but it isn't paid. For Ana, that means she faces 20 or more years where a dental bill will cripple her.
A problem with myriad causes requires myriad solutions, researchers say.
"Without adequate policy responses to the Covid-19 recession, [older female poverty] is likely to become much worse in the next decade," Dale and St John say. The pandemic means we need "a comprehensive reset" of social protection measures, including what's valued and rewarded as well as what counts as 'work'.
The government released its terms of reference for the Retirement Commission's latest review of retirement income policies this week, and they include a focus on women, Māori and Pasifika.
One of the possibilities floated to redress the gender pension gap is care credits-a reimbursement for unpaid time spent caring, recommended by the Retirement Commission in its 2019 review.
"It would be good if the government would consider the possibility of care credits," Dale says.
"When a person takes leave from work, their employer may continue the contribution, or in the case of a beneficiary, the government continues to make a contribution that is separate from their benefit income, and not accessible to them. It's a guaranteed contribution, or a guaranteed continuation of contribution, to their superannuation fund.
"It's not a huge amount, but it would make an enormous difference to the continuation of the growth of that person's superannuation."
Curtin says the gender pension gap is a system-wide challenge that the government's going to have to take a lead on.
"Care credits are one part of that."
In their 2019 report into gender differences in retirement income, Curtin and Dr Yanshu Huang, a postdoctoral research fellow with the Life Course Centre and ISSR at the University of Queensland, say research has pinpointed three main causes for the gender pension gap/ There's variation in the labour market participation of women and the male/female wage gap; variation in marriage, divorce, and sole parent patterns, and gender differences in longevity; and pension design coupled with the extent to which differences in lifetime earnings are reflected in the distribution of pension benefits.
They also note gender differences in financial knowledge which could help close the gap; women tend to be less confident with financial knowledge and men overconfident, they say.
Among other solutions, they take a look at other countries' attempts to address the imbalance through care credits, which they say is only likely to reduce the gender gap if applied to both public and private pensions (the latter isn't likely to provide sufficient retirement income).
There is no single model of care credits, as places they are used have, among other differences, pension plans that depend on the level of tax or contributions you've paid. But the pair cite several examples: Estonia, which pays employer contributions during childcare periods of up to three years per child; Norway, which credits individuals for periods of care work with approximately 71 percent of the average full-time wage; and Finland, where the state pays pension contributions for up to three years per child.
Curtin also says that if the New Zealand government plans to increase the age of superannuation at some point, the money it saves should be put to use.
"Perhaps they should be using that savings [to] undermine the structural inequality that's currently associated with the KiwiSaver element of the system."
But in his 13 December response to the Retirement Commission's 2019 review Minister of Commerce and Consumer Affairs David Clark said they're not yet on the cards.
"The ongoing welfare overhaul, and work on the Ministry of Health's funded family care arrangements, are already considering changes to policy settings for beneficiaries and for carers in the welfare and health systems," he said.
"For this reason, the government does not propose to consider any changes to the application of KiwiSaver to beneficiaries, or the introduction of care credits, at this time."
The government can't fix the gender pay gap on its own, Curtin says. The Mind the Gap campaign, currently being run by the philanthropic Clare Foundation, is encouraging private sector organisations to take some responsibility by asking them to be transparent about what they pay women compared to men.
"What we do know is that it's the ages between 30 and 44 that are most significant for women in terms of accumulating retirement savings, or not," Curtin says. "But those are the critical years for women in terms of childbirth. And in terms of caregiving to those children, but also to disabled family members and to older family members."
It's also crucial for everyone, particularly women, to improve their financial literacy, Huang says.
"There are a lot of things that we don't really have a lot of control over. But I think increased financial literacy might be able to counteract some of these issues," she says. "I think there's a stereotype that women aren't good at money, so we can counteract that."
She says workplaces can help too.
"[They] can institute better parental leave policies, provide more flexible work schedules, allowing for both care responsibilities and continued work… as well as topping up people's retirement funds."
Fixing the gender pension gap can feel a lot like climate change - how much can people personally do, when faced with structural problems? But those spoken to by RNZ say women of all ages should be learning as much about money and investment as possible and take an active interest in retirement now, not later. Because of compounding interest, the money younger women put away now will have a much bigger impact in retirement than if they start saving for it in their 40s.
Suzy Morrissey says men should also take an interest in the gender pension gap, particularly as they're overrepresented in positions of corporate power.
"To me, a lot of this comes down to the gender pay gap, and our positions in the labour market," she says.
"Men as managers can certainly be thinking about whether they're paying fairly and promoting fairly so that women of all ethnicities, if they are in the labour market, are getting paid fairly and recognised fairly for what they're doing."
*Ana did not wish to use her real name.