Gender Gap in Kiwisaver
The gender disparity in KiwiSaver is escalating into a significant issue, with recent investigations by the Retirement Commission unveiling some concerning results. The research indicates that men's average KiwiSaver balance surpasses women's by $9,352, a substantial 25% difference. This discrepancy underscores the issue of gender equality in investment and emphasises the necessity to challenge and rectify misconceptions shaped by conventional gender roles.
The Growing KiwiSaver Gender Gap
Data analysis by actuaries from Melville Jessup Weaver has shown that the gender disparity in KiwiSaver balances is not narrowing but rather broadening. Over a year, the average gap swelled by 5%, with men's average balance at $34,496, in contrast to women's $25,144 during the KiwiSaver slide of $3.6 billion. This disparity could not be attributed to differences in fund selection, withdrawal habits, or suspension behaviour between genders.
The escalating disparity among younger KiwiSaver members is especially concerning. The initial years of investment are pivotal for capital growth through the power of compound interest. If women commence with lower KiwiSaver balances than men, they will likely remain behind, even with the advantage of compounding. This can have a substantial impact on women's financial security, particularly as they near retirement.
What Causes the KiwiSaver Gender Gap?
The research also discovered variances in investment strategies between men and women. Men generally allocate a higher percentage of their assets to growth funds, whereas women tend to gravitate towards conservative funds. This disparity becomes more noticeable as individuals approach or exceed the age of 65. Interestingly, among younger savers, the difference in fund allocation is relatively minor. This suggests that lower average balances may lead women to adopt a more cautious investment approach, inadvertently restricting their potential for higher returns.
How Can We Close the KiwiSaver Gender Gap?
The expanding gender gap in KiwiSaver balances underscores the pressing need for reform. Both genders are not realising their full investment potential, which has implications for their financial futures. By dismantling these misconceptions, providing financial education, and empowering women to take charge of their financial futures, we can bridge the gender gap in KiwiSaver and pave the way for a brighter, more equitable future.
To address this issue, women can take several steps:
- Financial Education: Women should seek to educate themselves about KiwiSaver and investment principles. Understanding the power of compounding, the difference between various fund types, and the importance of regular contributions can significantly impact their KiwiSaver balance.
- Investment Strategy: Women should consider their risk tolerance and investment horizon and choose a fund that aligns with their financial goals. A more balanced or growth-oriented fund may suit those with a longer investment horizon and higher risk tolerance.
- Regular Contributions: Regularly contributing to KiwiSaver can help grow the investment balance over time. Even small, regular contributions can make a significant difference due to the power of compounding.
- Professional Advice: Seeking advice from a financial advisor can provide personalised strategies to maximise KiwiSaver benefits. Advisors such as National Capital can guide contribution rates, fund selection, and retirement planning.
- Advocacy: Women should advocate for pay equity and financial literacy programmes in their workplaces and communities. These initiatives can help address the systemic issues contributing to the gender gap in KiwiSaver.
By taking these steps, women can take control of their financial future, reduce the gender gap in KiwiSaver, and ensure a secure retirement.