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Investment Insights

Put the ‘super’ in superwoman: address the gap

Susan Easton

Written by Susan Easton

Head of Investment Strategy at Kiwi Wealth

Wednesday 19 September, 2018

In the 125 years since women have been able to vote in New Zealand, we've had three female prime ministers – yet in 2018 women still retire with less than men. Kiwi Wealth Head of Investment Strategy Susan Easton shares her views.


A couple of months ago I switched on the radio and caught the tail-end of an interview with Gillian Triggs, former President of the Australian Human Rights Commission.  Her comments were alarming.  Women aged 65 and over are one of the fastest growing groups encountering poverty in Australia.  Furthermore, Australian women at retirement have superannuation balances which are around half that of their male counterparts.


Women live longer, but our money doesn't

Economic hardship among older people is better known.  What is less well understood is that this burden falls disproportionately upon women.  Put simply, we earn less on average over our working lifetimes than men and as a result we don’t save as much. 

Adding insult to injury, we live longer than men and need to make our more meagre savings last a longer distance in retirement.


Illustrating the imbalance


Let’s take the example of a young New Zealand man and woman, aged 20 today and saving through until aged 65. We’ve made similar assumptions above for both except I’ve assumed the woman earns 85% of the man, being the gender pay gap in NZ [2] plus a little extra for good measure.


How will the future retirement imbalance look?

Come retirement day in 2063, the man might expect to have a super pot of around $489,000 in today’s terms while the woman might have around $424,000 - a difference of $65,000. 

Women are Super graph Susan

At this point, both the man and the woman switch to a lower risk conservative style portfolio and decide to make annual withdrawals to use up the entirety of their savings over their expected lifetimes [1].  The man could draw down around $24,000 per annum before exhausting his savings while the woman will have to make do with annual drawings of $19,700 of from her super pot before its exhausted. 

Doesn’t sound too bad does it?  Except that my assumption that the woman might earn 85% of the man’s wage over her lifetime is probably a bit generous.


Why women are on an uneven keel

Not only do women earn less than men on average when they are in work [2] but women may frequently be out of the workforce or be in part time work for extended periods.  This is often to look after children or perhaps an elderly or sick relative.  For women the window for paid employment (and saving) is likely to be much smaller. 

I haven’t seen any reliable indications of what average lifetime earnings might be expected for NZ women compared to NZ men.  However, my gut feel is that it would be a difference that might be depressingly similar to the gap that leads to the dramatically smaller-sized super pots of our Australian sisters on retirement (as compared to Aussie men).


Risk-taking can be an advantage with investment

Lower lifetime earnings aren’t the only consideration driving super pot size.  We know that women tend to be more conservative in their investment approach.  Dr Claire Matthews from Massey University Centre for Banking Studies says men and women do make different choices about their retirement savings and points out that when it comes to long-term savings, risk-taking can actually be an advantage. 

Let’s revisit our hypothetical woman aged 20 today and see how that works.  Holding all other assumptions constant, let’s say she chose a conservative fund (rather than a higher risk growth option) as an investment approach for savings over her entire lifetime.  This has quite a bearing on outcomes. 

At retirement she would have a super pot closer to $229,000 in size and would be limited to drawings of around $10,600 per annum.  About enough for milk arrowroots in Bluff, as my former colleague Gareth Morgan would put it. 

A conservative fund may well be the right choice given certain circumstances and risk tolerances but my point here is to address the issue purely from the standpoint of expected returns over a very long time frame.


Overcoming the underwhelming

The causes and solutions for the gender imbalance in incomes and retirement savings are complex. As women we can’t wait for societal or policy changes to happen and solve the problem for us, though that definitely needs to happen. 

Unfortunately for many women saving of any kind is going to be impossible as they grapple with the simple day to day needs of a roof over their heads, keeping the kids fed and enough left over to afford a school trip or new pair of shoes. 

For those of us that can, we must do what we can when we can and start to build financial resilience through our lifetimes.  What can you do if you’re a bit freaked out by this whole money and saving thing?  Where to start?


Arming yourself with the right information is easier than you think

Fortunately, the internet is not just about YouTube and Facebook or Amazon.  There is plenty of great accessible info these days.  The Commission for Financial Capability (CFFC) is an excellent resource, as is Massey University Fin-Ed Centre.  Personally, I’m a fan of the Khan Academy whose online courses cover finance and capital markets, though it’s not strictly beginner-level.

If you’re feeling more confident grab a friend and head along to a night course on money and investment.  Your KiwiSaver provider may also offer information or education evenings.  Make the most of those opportunities when you’ve got knowledgeable people in the room with you.  When it comes to money, no question is ever too dumb.


Is a shock what you need?

Perhaps the biggest favour you can do yourself is to scare yourself silly by using some of the online retirement calculators (Sorted.org has a great one) and realise that at your current savings rate you’re going to have to work until you’re 85.  Then go and seek advice about a suitable financial plan and the best choices for investment based on your individual circumstances.  You may also need therapy at this point.


Don't put the conversation off

Whatever you do, don’t put the conversation off.  Money is not just a men’s game and this whole superannuation thing is too important to leave to chance.  Women are indeed superwomen.


[1] A man born in 1998 can expect to live 91.6 years while the equivalent for the woman is 93.8 years.

[2] In August 2018, Stats NZ stated the gender pay gap in NZ was 9.2%.  It’s a high-level indicator of the difference between men and women’s earnings when comparing the median earnings of women and men in full and part-time work.  The Ministry for Women website has more information on this subject.


This article reflects the personal views of the author at the date shown above. The information provided, or any opinions expressed in this article, are of a general nature only.

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