Why women face serious financial disadvantages

This International Women’s Day, we’ve taken a look at the money issues affecting 50% of the population...

Gender equality is in the news an incredible amount just now, thanks to #TimesUp and #MeToo movements.

And this International Women’s Day, financial issues that uniquely affect women are making headlines and they also important.

Because, for a variety of reasons, women’s finances are all too often at a disadvantage. They key disadvantage, of course, is the gender pay gap and the fact that women are more likely to take career breaks to care for children or elderly parents.

We wanted to take a look at the financial issues affecting women and also what they can do to overcome such disadvantages and help their finances catch up with where they ought to be in a fairer world.

The gender pension gap

Women are disproportionately likely to miss out on a pension, increasing their chances of old-age poverty. Almost a third are excluded from auto-enrolment into workplace pensions as they earn less than the £10,000 threshold.

Kate Smith, head of pensions at Aegon, explains: “Gender pay equality is a big talking point, but we can’t ignore the growing pension inequality which also exists today.

This widens with age, compounded by women’s disrupted working patterns. And it’s not helped by auto-enrolment which disproportionately excludes more women than men from workplace pensions due to low earnings.

“We know that more women than men don’t meet the eligibility criteria with almost a third effectively being excluded from workplace pensions as they earn less than £10,000 a year.

“Auto-enrolment doesn’t allow for people with multiple jobs to combine their earnings and with women being more likely than men to have multiple jobs, this creates a problem for the future.

"This discrepancy will continue to fuel pension inequality, unless changed.”

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Women save less

A survey carried out by Close Brothers Asset Management, in conjunction with the Pension and Lifetime Savings Association (PLSA) shows that women are far less likely to make savings and save into a pension.

Jeanette Makings, head of financial education at Close Brothers, says: “The savings crisis is thrown into stark relief when looked at under the lens of gender imbalance.

“Women are not only earning less and therefore saving less, but are significantly less confident about the savings options available and how to choose what’s best for them.”

This isn’t recklessness on the part of women. The savings gap is assisted by a significant pay divide, with the mean annual salary of women surveyed being £27,379 compared to £37,655 for men, nearly 30% less.

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Women have higher levels of debt

A new report from Insuring Women’s Futures, an initiative from the Chartered Insurance Institute, shows that student debt almost doubled between 2001 and 2017.

However, women are less likely than men to succeed in repaying those debts in the allotted 30 years because their earnings are typically lower.

The report shows it takes women an average of 13 years more than men to clear those debts, making it harder to for them to save for their futures.

On top of that, younger women face increasing levels of consumer debt. Between 2006 and 2012, the average debt faced by women aged 24 and under increased at 10x the rate of the population generally.

What can be done?

So how can women get a fair go at the financial game when the dice seem so weighted? Mutual insurer Royal London has five suggestions.

Get what’s owed
Every year billions of benefits go unclaimed. In fact, recent research from Royal London shows that 63,000 mothers are missing out on their National Insurance credits, needed to boost their State Pension.

That’s because of changes to Child Benefit that mean more couples are simply not claiming it.

They estimate the future pensions rights lost since the change was made could be more than a billion pounds.

Start saving
While the auto-enrolment scheme has increased the number of both men and women saving into workplace pensions, the minimum contributions are unlikely to be enough to secure a decent retirement income.

Royal London urges women in particular to try to top up their contribution where possible to secure a financially secure old age.

Get investing

More than a million investment ISAs are held by men, compared to just 870,000 by women. That’s often attributed to being down to a lack of confidence so Royal London highlights that not all investment has to be high risk.

A steady return built up over the long term will go a long way towards building a decent pot.

Don’t rely on others
Women very often take a pay hit when they have children or to care for elderly relatives. When that happens, it can be tempting to rely on the breadwinning partner for financial security.

However, not all marriages last and it’s important for all married partners to think about how they would cope on their own if the relationship went south.

Royal London adds: “If you are married then you would negotiate a financial settlement as part of a divorce but what if you aren’t married?

We are seeing more couples choosing to live together rather than get married – in 2016 there were 3.2 million cohabiting couples in the UK.

“However, while these couples can live together for years and even raise children together there is no concept of common law marriage in the UK. This means that if you split up, or your partner dies, you could be left with nothing.

“It may not sound romantic, but setting up a cohabitation agreement when you move in together can help you outline who owns what. Updating Wills and pension documentation is also vital.”

Get advice
Financial advice can really play a role in securing long-term financial security for women and helping them overcome the fact that the cards are often stacked against them.

Recent research by the International Longevity Centre supported by Royal London showed that those who took financial advice in the 2001-2007 period were £40,000 better off than their equivalent non-advised peers by 2012-14.

One thing that’s worth adding to that advice is to find an adviser who won’t adapt their advice depending on their client’s gender.

It’s been suggested that some advisers don’t offer riskier opportunities to their female customers – but women need all the choices men get too.

What do you think? Can women overcome these financial challenges and what more should be done to help? Have your say using the comments below.