With the average woman in her twenties likely to have £100,000 less in her pension pot when she retires compared to a man the same age, narrowing the gender gap and fostering financial empowerment could be transformative.
Differences in pay, having children and for many, a lack of confidence when asking for financial advice, all play a part, with many women inadvertently experiencing financial disadvantage in relation to their pensions. Paired with the cost-of-living crisis, there is no wonder that women are increasingly concerned about their financial future and what this all means for their pension.
Working in financial planning, I provide women financial advice on savings, investments, pensions and estate planning. Positively, we are, overall, becoming more financially independent and aware. However, legacy issues are bound to remain and cause difficulties.
Women’s role in finance
Traditionally, we have seen that men take on the more financial role, whereas women tend to take on the caregiver role and often work part-time to fit the needs of their children and families. This understandably can have a big impact, both in terms of earning power, and the impact of this in years ahead, with HSBC UK finding that women are more likely to worry about finances, are more concerned about the future and less likely to consider themselves financially knowledgeable.[1]
~Novel Serialisation: Heavens Fire~
This can affect not just daily financial decisions, but also bigger choices such as investments, with many women feeling a lack of confidence in this area. A study carried out by YouGov found that 52% of women have never owned any investments compared to 37% of men, with only 13% of women thinking they have a good understanding of investing and stock markets.[2]
Despite this, more women are becoming financially independent and aware. In a recent report, Forbes Adviser stated that women tend to research their investments more than men, which is encouraging from an advisor point of view.
Savings and Gender Pension gap
Many of my female clients are just as concerned about savings and investments, especially the pension gap and how this will affect them when it comes to retiring.
Aviva recently reported that there is a 40.3% gap in pension savings between women and men, which works out as an average difference in pension income by gender of around £7,500 a year. The impact of this is substantial with women thought to need £100k to bridge the savings gap, another £50k to cover longer life expectancy and £35k to pay for any associated care needs. This means saving £210 more a month from age 25 until the day they retire. [3]
Another contributing factor to the gender pension gap, in some sectors, is pay disparity, with an average 15.5% difference in pay between genders. This in turn, means that men tend to have more deducted compared to women when it comes to pension contributions.[4]
In my experience working with couples, one person will naturally take the lead role in financial matters. As time goes on, we are seeing a more equal distribution of financial and family responsibility for both partners.
Financial impact on having a child
From what I have seen and experienced first-hand; women are more disadvantaged in the longer term as they tend to be the one that works part-time after having children.
Whilst shared parental leave is gradually becoming more common in the UK, not all employers offer this, and benefits can vary. Women are thinking more of the present, and daily responsibilities which is understandable, but this will impact your 60-year-old self and pension pot. For this, and other reasons, women often are not as confident in their pension and retirement planning.
Financial planning can help lessen the burden and impact of fluctuating earning potential, particularly after life changing events like becoming a parent, unemployment, or divorce. It’s never too early to start planning and thinking about both your future, and the here and now in terms of wider financial issues.
Advice to women and how they can plan for their financial future
I think it’s easy for those in the financial sector to advise individuals to visit a financial adviser. However, despite any lack in confidence there are many resources and advisors available regardless of your current and future financial situation. Websites such as wayfinder run by the Chartered Institute of Securities and Investment, or unbiased and vouchedfor list qualified advisors in your area. The recently rebranded government site MoneyHelper also has lots of useful content.
There is still often a stigma attached to talking about money, we have all experienced it and many of us have been programmed to believe it should be a hush hush topic. However, to gain financial confidence, I would say, we must start talking more about money if we want to be in control of our financial lives, so overcoming this is essential. Families especially across the generations, should have open conversations about their finances. Talking about money normalises it, whether you’re male or female, and makes the whole topic less intimidating.
Books, apps and podcasts are all great starting points to improve your financial confidence and education. This can all help familiarise your finances, budget, what your everyday looks like and get to grips with your income and outgoings.
Turn the financial tide
Our role as financial planners has changed significantly with women becoming more engaged, forging ahead with their own financial plans and their careers. The difficulty can be more that the balance isn’t necessarily there, and with lots of juggling, finance, understandably, often gets pushed down the priority list.
It’s important to set goals on what you want to achieve, what you need funds for and how and when they will be used. All this forms part of financial planning from where you are currently, what you want to improve, and how to get to the next stage, in terms of being prepared for the future.
This creates your unique roadmap to help with understanding each piece of your financial journey, and how it all comes together, while helping to build your confidence and plan your own financial independence.
Final thoughts and Top Tips
My top tips to woman wanting to overhaul their finances and get organised would be:
- Make use of the resources out there, whether that is podcasts, articles, books etc.
- Talk to people about finance. It doesn’t have to be the nitty gritty but even a general discussion amongst friends or family could help and facilitate understanding.
- Engage with a financial planner if you can. Consulting with one can help you achieve your goals and help you work towards a comfortable retirement.
- Think of the future. I know it is easy to think of the here and now but the sooner we plan for our retirement the easier it will be, and we will thank ourselves when the time comes!
Over to you now Money and Finance readers.
How do you think the issue around the gender pension gap will evolve over time? Will it get better as women gain financial independence and empowerment or will the gap continue to widen?
By Rhian Morgan
About Rhian Morgan
Rhian Morgan is a Financial Planner at Acumen Financial Planning headquartered in the Northeast of Scotland. Rhian started her career journey in Acumen Financial Planning’s support team in 2006 and five years later in 2011 became a Financial Planner. Building her knowledge and experience over the years, Rhian specialises in Estate Planning, Trusts, Intergenerational Financial Planning, Trust and Investment Planning.
For more on Acumen Financial Planning and the services they provide, please visit: https://www.acumenfp.com
[1] https://www.hsbc.co.uk/wealth/articles/bridging-the-gap/
[2] https://www.forbes.com/advisor/investing/woman-better-investors/
[3] https://adviser.scottishwidows.co.uk/assets/literature/docs/23389.pdf
[4] https://www.aviva.co.uk/aviva-edit/your-money-articles/women-know-gender-pension-gap/
