New research out of Te Ara Ahunga Ora Retirement Commission shows a 36% difference in the yearly contributions that men and women put into KiwiSaver – even though they contribute the same percentage of their salaries on average.
The New Zealand Policy Research Institute at AUT was commissioned by the government's retirement agency to carry out research using newly available information in Stats NZ’s Integrated Data Infrastructure (IDI), which allows KiwiSaver contribution rates to be investigated from April 2019.
The research report, which was released on Wednesday by the Retirement Commission, examined the characteristics of KiwiSaver members’ to understand how contribution behaviour varied across gender, age, ethnicity and income levels.
The research indicates that this 36% gap is primarily caused by the gender pay gap rather than a difference in contribution rates. Meaning women are losing out on KiwiSaver returns because they’re earning less than men, not because they’re contributing less into their KiwiSavers.
The research found that because women are often in part-time jobs and take on unpaid caregiving roles, this widens the KiwiSaver contribution gap further.
According to Stats New Zealand, the gender pay gap in NZ was at 8.6% as of June 2023 last year although the Ministry for Women says the gap is much wider for wāhine Māori, Pacific and Asian women.
During a preview discussion of the research findings last week, Te Ara Ahunga Ora Policy Lead Dr Michelle Reyers said the 36% gap found in the research boils down to looking at the gender pay gap over a instead of by the hour which is how Stats NZ gets its 8.6% gender pay gap figure.
“What we've done in this data is we've seen the cumulative effect over a full year period. And during that time, we know that women generally would have taken more time out of paid work. So this is an average figure. So it's going to take into account the average career or the average working hours of women as well,” she said.
“We often talk about the gender pay gap. We're quite excited that it's under 10%. It seems to be falling. But actually when we look at a whole year's perspective and the impact on KiwiSaver contributions, we're seeing that there is still a mark between the outcomes for men and women on average.”
The research also found that pay disparities were reflected further when it came to the ethnic pay gap in KiwiSaver and were “mirrored in lower KiwiSaver contribution amounts” for Māori and Pasifika.
The research also found that ethnic wage disparities were reflected in reduced KiwiSaver contributions for Māori and Pasifika.
“If you are Māori or Pacific, you are likely to have around $1,500 less contributed into your KiwiSaver account annually than a European person,” The commission says.
This is even though Māori have the second highest average employee contribution rate of the ethnic groups reported in the research – despite having the lowest average income.
“So again, [this is] showing us that this is a story of structural inequities rather than anything that individuals are doing incorrectly,” Reyers said last week.
Less than 10%
Last June, there were approximately 3.3 million KiwiSaver members in New Zealand. Reyers said data from Inland Revenue indicated that 2.3 million members contributed to their KiwiSaver during the financial year ending in June 2023.
She said that the current KiwiSaver settings around automatic enrollment and opt outs were “working really well”.
KiwiSaver enrollment numbers are especially high for those in the age groups like 25 to 34 – which has an enrollment number of 97% – and the 35 to 44 age group which isn’t far behind at 95%.
“So a real success story for a voluntary scheme,” she said.
The average employee contribution rate was about 3.7%.
However the research found that less than one out of ten employees have an employer contribution rate of above 3%.
“So over 90% of employers are contributing at the minimum rate of 3%, very few are actually contributing at that higher rate,” Reyers said.
“In this picture what we're seeing is employees are pulling their weight and trying to contribute more than that minimum, but we're not seeing necessarily that employers are doing more than is required by law, which might not be a surprise for some of us.”
Retirement Commissioner Jane Wrightson said on Wednesday that the Retirement Commission currently isn’t seeing employers show the initiative the commission would like to see.
“One in three employees already contribute at a rate higher than the 3% minimum. Unfortunately, less than 10% of employers contribute more than the compulsory 3%, and almost half include KiwiSaver contributions in total earnings for some or all of their employees, which can disincentivise employees to contribute,” she says.
“If we want to see change, I think we need to see a more proactive attitude across the board from employers. We all have a stake in New Zealand’s future and there are concerns that people may not be saving enough for retirement, so we need to be taking practical steps to tackle these issues.”
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