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Care credit proposed to help close gender pension gap

A “care credit” paid into women’s KiwiSaver accounts when they take time out of paid work to look after family could help to close the gender pension gap in New Zealand.

This is one suggestion up for discussion in the three-yearly Review of Retirement Income Policies, being undertaken by Interim Retirement Commissioner Peter Cordtz.

A research paper prepared by Jennifer Curtin and Yanshu Huang of Auckland University’s Public Policy Institute found that more than twice as many women as men aged 65 and over were living in poverty – 14% compared with 6.6%.

Cordtz says this likely follows women arriving at retirement 18% on average worse off than men, due to New Zealand’s gender pay gap of 9.2%, more women working in lesser-paid jobs and therefore unable to save as much through KiwiSaver or other means, and taking time out of the workforce to raise children or look after elderly parents.

Women’s financial situation in retirement is compounded by their longer life expectancy – a woman aged 65 today can expect to live to 86 compared to 84 for men – and, as they are usually the younger partner, be widowed and bear the expense of living alone for longer.

Curtin and Huang note that other countries attempt to redress this disadvantage by paying care credits into women’s pension accounts in recognition of the time they take out of the workforce. Estonia, for example, pays employer contributions during childcare periods of up to three years per child. Norway credits individuals for periods of care work with approximately 71 per cent of the average full-time wage. When women retire in Finland, their pension is topped up with contributions of up to three years per child.

Cordtz says the concept has merit, and is among those being considered before he finalises his recommendations to government in the Review’s report, due to be tabled in Parliament in December.

“We know the challenges faced by women in saving for retirement are worldwide issue, so we’re keen to understand what’s working internationally and how that might apply in a New Zealand context,” says Cordtz. “The financial cost of caring for others does make women financially vulnerable long term, and we know this is compounded for Māori and Pasifika women who tend to provide a lot of support for their extended family and community.”

Public submissions on the Review are open until October 31. Visit cffc.org.nz for more information.

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Background

The Retirement Commissioner is required by law to carry out a Review of Retirement Income Policies every three years.

Click here for the 2019 Review’s Terms of Reference

Interim Retirement Commissioner Peter Cordtz is overseeing the 2019 Review, being undertaken by the staff of his office, the Commission for Financial Capability.

Independent research papers commissioned for the Review are posted on the CFFC’s website: cffc.org.nz The views expressed in these reports are entirely those of the authors and do not necessarily reflect the views of CFFC or the recommendations to be made at the end of the current Review.

Public submissions are open until October 31.

The Retirement Commissioner’s report and recommendations will be tabled in Parliament in December.

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