By Gillian Boyes, Investor Capability Manager
First published by the New Zealand Herald on 1 January 2020: https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12296301
What I love most about the start of a new decade is the promise of positive change. The 1960s were all about civil rights, then in the 80s we said no to nukes.
As for the 2020s, my hope is that it's the decade New Zealand women finally achieve financial equality.
In 2019, the gender pay gap was 9.3 per cent. Twenty years ago it was 15.2 per cent.
You'd hope with all the awareness now about gender equality we'll have no pay gap at all by 2029. But let's be honest; even that's too far away.
Because it isn't just about us having less money now; it also means less in our retirement.
Simple maths says the less you earn, the less your set percentage of KiwiSaver contributions will be. For women, that means a similarly stunted nest-egg.
Add the time taken off work for babies, and sacrifices made to raise them, and there's little wonder that women's KiwiSaver balances are now an average 28 per cent lower than men's.
What's more, in the end we have to make it last longer, as women have two to three years more life expectancy.
It all doesn't seem very fair, and it isn't.
But instead of getting annoyed, why not take action? Because there are ways women can close the investment gap over the coming decade.
The easiest is ensuring KiwiSaver works for you. Here's how:
Accept more risk
In finance, taking on more risk is the price you pay for the reward of higher returns.
Yes, this can mean a bumpy ride as the value of your investment changes, but the reward tends to be a bigger nest egg at the end.
As a rule, if you won't need your KiwiSaver for more than a decade, you can afford to accept more risk, knowing the usual ups and downs will iron out over time and ultimately trend upwards.
Those who've been prepared to take on more risk in the 2010s have seen their savings grow significantly faster.
And which gender has gained the most? Yep, men.
At last count, 34 per cent of male KiwiSaver members were in high-risk funds, those labelled "growth" or "aggressive". For women, the figure was just 15 per cent.
This risk aversion has cost women over the past decade when higher risk funds have typically recorded higher returns.
Don't stop contributing
The gender investment gap isn't just about unequal pay. Women are more likely to sacrifice time from their careers to raise children, too.
It starts with maternity leave and continues through the school years when some women take part-time jobs or other less demanding work that lets them "be there for the kids".
Whatever your income at this time of life, resolve to keep paying the minimum contribution you can.
Even better, see if it's possible for your partner or joint account to make voluntary payments into your account, so you don't fall behind.
If you can't contribute regularly, consider contributing enough to ensure you receive the Government's Member Tax Credit. About $1000 a year gets an extra 50 per cent topup.
Compare the fees
KiwiSaver providers typically charge between 0.5 to 2 per cent of your annual balance, irrespective of whether they make a profit.
Fees are regularly up to a fifth of a given fund's annual returns, sometimes higher. Spread that over a lifetime and it's a lot of cash in their wallets, not yours.
Providers with higher fees often claim they're higher to compensate them for earning better returns and/ or their more hands-on management of your funds.
Yet the Financial Markets Authority's quarterly KiwiSaver tracking shows no clear link between high fees and high returns, apart from a couple of standout funds.
Use the online tools
A great online tool at your disposal is Sorted's Smart Investor website. It puts 284 KiwiSaver funds side by side: their fees, returns and the "mix" of their assets - showing how diversified they are (or not).
Use it to compare your fund with others, and the overall industry average: those earning the highest returns or charging the lowest fees, or perhaps those your partner or your friends are using.
It also lets you see if your fund is invested in a specific company; handy for those who might not want to invest in companies, industries or countries whose ethics don't match their own.
Many providers also have online tools that let you calculate what you'll have at retirement based on your current settings, and what you could have if you were to raise or lower your contributions or risk.
Resolve to look hard at your KiwiSaver settings this summer, and if what you see isn't good enough for you and your future plans, make the switch without delay. You can always change funds later.
And if you haven't joined KiwiSaver yet, or aren't currently contributing, make 2020 the year you get on with preparing for your retirement.
Just don't wait another year! Take action now, and collectively let's close the gender investment gap by the end of 2029.