Stuff your Dad would tell you: Saving for retirement is harder for women

David Boyle is the head of sales and marketing at Mint Asset Management.

OPINION: Last Thursday, I spoke on a panel organised by the Financial Services Council and Women in Super. The topic was “How do we bridge the retirement gap between women and men?”

Spoiler alert, I didn’t have any silver bullets, but following on from my earlier piece which focused on what you could do individually, I want to share some things the financial services industry could do to help close the gap a little more, and a few other thoughts at an individual level.

When Phillipa Newlove rang me on behalf of Women In Super a few months ago asking if I would like to be part of this panel (and that I was going to be the only male), I was briefly taken back to my childhood. Can you remember Sesame Street? If not, look on YouTube for a song that goes like this:

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“One of these things is not like the other, one of these things doesn’t belong, can you tell which one is not like the others…”

I mean, jokes aside, it’s a topic I suspect many men don’t want to talk publicly, let alone on a panel in front of 180 women. Possibly because it comes with the fear that we might say the wrong thing.

But, as one of the panellists emphasised, we need to be talking about this more, and it can’t be just women. The messages are just too damn important not to get out to our current and future generations.

If we lived in a world where women had pay equity, and they didn’t have to take time out of work for family, the challenges wouldn’t be quite so daunting.

However, we don’t live on that fantasy island, so here were some of my thoughts to help improve that gap, while those two big areas continue to be addressed.

Back to the future

I held up a picture and asked if anyone knew what it was.

It was what I took to primary school every week with my 20 cents pocket money, which was popped into my school Post Office Savings Bank account. It was the first place I learnt about interest and the 8th wonder of the world being compound interest. Simply put, interest earning interest.

It was the catalyst that started me and many of my fellow students on their savings journey.

School banking disappeared years ago. Since then, many parents and the general populous keep crying out about getting financial capability into schools.

The good news is that it is. Sorted in Schools started when I was at the Retirement Commission back in 2018. It’s been going great, with around 70% of secondary schools using the programme.

Let’s hope the other 30% get cracking and pick it up as well, so our future generations learn the basics when it comes to financial capability and are better prepared to start that lifelong journey.

While not specific to women, teaching broad investment concepts and linking them to KiwiSaver, the grownups’ version of school banking, is the best way via the workplace to build a long term savings and investment habit over your working career.

I believe in years to come, it will really help our future female generation land in a better position when they decide to hang up their boots and enjoy a better retirement than many today.

Especially if the two fundamental issues of pay equity and non-paid time out of work are addressed.

Look after yourself

My key message for female students, which has to be loud and clear in secondary schools and in their homes, is for them to develop and build their own financial independence. In other words, don’t rely on others to get you there.

Today’s life stages are a far cry from the days of my mum and dad. Life is far more complicated now than it was back then. Irrespective of your relationships in the future, it’s so important to have your own personal long-term financial objectives.

If you get to retirement in the same relationship you started years ago that’s great. But if you don’t, having a personal strategy that weathers the odd relationship break up is critical for your future self in retirement.

KiwiSaver, for most New Zealanders, is the best way to save for your retirement. According to recent research by Melville Jessup Weaver, 51.3% of KiwiSaver members are women.

Be bolder

The move (finally made by the Government in December) for future default members to be allocated to a balanced fund, instead of conservative funds, is well overdue.

I believe this has materially impacted women in particular, who have previously been more likely to sit in conservative funds and miss out on 12 years of generally high returns from buoyant capital markets.

There has been a heap of research done regarding KiwiSaver by many different organisations and government entities over the years and, latterly, the NZ Society of Actuaries.

They have highlighted that for KiwiSaver members aged between 45 and 64, the fund choice has been driven by account balance rather than gender. The lower the balance, the more conservative people are. Which intuitively makes sense. If that’s your lot, you want to make sure you protect it. Notwithstanding the fact you still may have 20 years or more before you retire.

To compound this further, if you are not contributing regularly (because of family commitments) it should be pretty obvious why women in that age bracket have lower balances, after spending five or even 10 years out of paid employment. The current and future governments need to find a solution here, and I know the Retirement Commissioner is flying the flag on this one.

Check the fine print

Another key area I am really concerned about is making sure employers are meeting their KiwiSaver obligations. Simply put, they have to match your contribution, at 3% in most circumstances. If they are not, and you haven’t agreed that your total employment cost includes KiwiSaver contributions, they are breaking the law.

Better communication

For the first time, KiwiSaver members have experienced a prolonged period of negative returns. Understanding the impacts of switching funds and even provider during this period could have a catastrophic impact on your future retirement savings. One thing all KiwiSaver providers need to do is review and tailor their communication about this for their female audience.

If KiwiSaver providers, the Retirement Commission, FMA, and even the Government could agree what the key messages are, say them in the same way and at the same time, that would have an incredible impact over time.

A word of advice

The last point I raised is the access of affordable professional advice, specifically tailored to meet women’s needs and circumstances. We desperately need more women advisers in our industry and the cost of delivering that advice is more expensive than ever.

Digital advice and tools can help, but they also need to be tailored for women, and they are not the answer for everyone. The value of advice is very hard to measure and, in most cases, only time will tell how good it was. That said, I am pretty sure those who have received advice most likely are better off than those who don’t. So perhaps, after you visit the Sorted website or your KiwiSaver provider, and you feel you need more help, an investment by government to cover your advice fee could be a great benefit.

Think of it as paying it forward. Each person who reaches retirement in good shape means they won’t need extra government support outside New Zealand Superannuation and there would be more money to help those who can’t. How cool would that be?

David Boyle is Head of Sales and Marketing at Mint Asset Management Limited. The above article is intended to provide information and does not purport to give investment advice.

Mint Asset Management is the issuer of the Mint Asset Management Funds. Download a copy of the product disclosure statement here.