20 Jul XX The High Cost Chromosome
by Jean Strock AFA
On Friday 15 July, I attended XX The High Cost Chromosome, a forum hosted by the Retirement Policy and Research Centre at the University of Auckland Business School.
The forum examined the financial and retirement issues facing women who over their lifetimes tend to earn less, save less, retire earlier and then go on to live longer lives than men.
On average women will live three years longer than men and both sexes are living longer than ever before. The amount accrued at retirement now has to support retirees of both sexes for twenty years or more.
Why do women accumulate less than men? New Zealand women are very well educated by international standards but tend to choose careers with lower pay. They take contribution holidays to raise children, then when they return to the work force it is likely to be in part time or casual roles.
When investing they are more risk averse, disliking volatility. The choice of an overly conservative investment strategy will have a negative effect on the final amount accrued.
Of interest was the consistency of the ‘gaps’ between women and men across the world. In Europe the average wage gap is 18% but the average pension gap is 37%. In Australia the wage gap is 18.2% and women have 57% less Super than men. The gaps in the UK are similar, with women arriving at retirement with 40% smaller pension pots.
In New Zealand the gap is already showing in KiwiSaver account balances with a 37% gap between men and women at age 65.
For women retiring in New Zealand, our NZ Superannuation scheme is a great leveller. It is gender neutral by virtue of not being linked to time in the workforce or lifetime earnings. It is a universal scheme based on residency criteria. A retired woman in New Zealand receives the same basic income as a man and this limits the degree of poverty women could otherwise face in old age.
So what can be done to address these important gender issues?
Susan St John felt that ‘’the elephant in the room’’ is that unpaid work in the home is not valued as it should be and there needed to be a fairer distribution of caring roles within society.
A US study found that it would cost an average of $98,000 to outsource ‘home management’ although it is seen as being of little monetary value. Should society make a greater contribution to women who leave well paid jobs to raise future tax payers?
Sharon Giblett from Women in Super urged women to take professional advice, establish a plan and then stick to it. They should become informed and understand the issues they face. A man is NOT a retirement plan!
Women on parental leave could consider making at least the minimum contribution to qualify for the KiwiSaver investment tax credit. Enlightened employers could continue the employer subsidy.
Finally decumulation strategies become even more important when you have to spread a smaller amount of savings over a longer life span. Again good advice, financial literacy and early preparation are key to surviving with dignity in old age.