On average, women in the UK face retirement with 39% less in their pension pot than men, according to the Financial Reporter. In this article, we ask Senior Financial Adviser and Fiducia Wealth Management Director Susie Laws why this is and what women can do to pivot the situation.
Are women are generally less willing to “save for the future” than their male counterparts?
Absolutely not! Ultimately, we are all different in terms of our saving (or should I say spending) habits, and you cannot make sweeping generalisations of character traits based on gender alone. That said, there is a noticeable gulf in terms of pension provision, which increases as you go up the generations. For the oldest generations where traditional historical gender roles were the norm (and the women tended to stay at home to raise children), it’s not uncommon for women to rely on their state pension with no private provision. This has more to do with working patterns than saving habits, however.
With changing attitudes and increasing financial independence, women are generating their own wealth and are therefore increasingly saving and investing.
Why then are their such differences in pension provision?
We all know that when we save money, we typically earn a little bit of interest (very little with the Bank of England Base Rate being so low!), but if the rate paid by your bank falls below the rate of inflation, the value of your savings will drop in real terms.
Whilst women can be just as voracious at saving as men, studies show that women tend to have lower attitudes to investment risk and are therefore less tolerant of the volatility which investing in stocks and shares involves. This is to make a generalisation, since everyone will have a different risk tolerance, which is why working with an independent adviser can be so important to achieve the right investment approach for that individual.
If you have a couple who chose to have children, it will generally still be the woman who takes the career break, or who moves to part time hours. This can have a real impact on a woman’s future financial health and independence. It goes without saying that if you have a part-time salary and you are saving a fixed percentage (i.e. how most pension contributions are calculated), you will be saving a smaller monetary amount than the full time equivalent. In my view, it is this higher percentage of non-working or part-time working women that has the biggest impact the “pensions gap”.
This combined with a more cautious approach will ultimately lead to smaller funds. (i.e. cash savings will deplete in relative terms once inflation is considered); whereas higher risk investments can produce greater returns.
What can government, the financial sector, and individual women do to become more engaged investors?
There are several areas in which institutions can influence change. Education is paramount. Increased education in schools and workplaces (i.e. Fiducia’s schools programme) will increase understanding and engagement. Women also need to not be afraid to speak to an adviser, start a finance group with friends, read the financial press etc. Talking about money openly will increase their understanding and expand their horizons. Knowledge is power and once the momentum is gathered then things will change.
Whilst financial services has been a traditionally a male dominated sector, (I always joke that a financial planner conference is the only one where there is a queue for the men’s loo’s rather than the women’s at the coffee break!), this is improving and many influential women are inspiring others and encouraging a change in culture.
An increasing number of women are choosing financial planning as a career and it is a profession which is opening itself up to flexible working. However further work undoubtedly needs to be done to ensure that women feel understood and represented by the financial services sector.
Markets have fallen sharply due to the coronavirus. If women were already less likely to invest, what do we tell them now?
Don’t panic! Investing and financial planning is a long-term game and there will always be short term movements which can look dramatic. In the words of Warren Buffet, I’d say be brave when others are afraid, and afraid when others are brave.
A financial plan will always need to be regularly reviewed and course adjusted to consider any changes in circumstance, but it is still important to have a plan to begin with. Investors who know what they are setting out to achieve will always experience better final outcomes than those who just close their eyes and hope for the best.
Some people can also be put off by the perceived cost of financial advice, but ultimately this is about value, not cost. Advice is not just for the rich and I would encourage everyone to dig out their pension paperwork out from the “drawer” (yes, we all have one!) and see if they can build it towards a more prosperous future.
If you feel that you or a member of your family could benefit from some tailored financial planning advice, then please visit the website to book an appointment.
This article was written by Susie Laws.
Susie Laws is a Chartered Financial Planner and Director at Fiducia Wealth Management. Fiducia is a multi-award-winning Chartered firm of financial planners working with individuals and businesses.
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