5 min read

The gender savings gap – why women invest less

According to recent research, while women are more likely to be in charge of the household bills and budget than men, they are far less likely to invest.

Lady looking at laptop

Why do women invest less?

Women typically live longer than men, earn less and are more likely to take career breaks during their working lives. That means they tend to end up with smaller pension pots and less money saved while also having a longer retirement over which to make their money last.

But some experts warn that women should start investing or risk a shortfall when they reach retirement.

With so many obstacles already to overcome, it is worrying then that YouGov research has revealed more than half of women have never invested. That’s despite a similar number (45 per cent) of women agreeing that investing is a good idea.

A lack of financial role models

It is, perhaps, not surprising that so few women feel compelled to invest. There are not many female role models leading the way in the investment world. In fact, less than 10 per cent of the 2,000 or so funds available to UK investors are managed by a woman.

Lack of confidence is a main reason why so few females have an investment portfolio. Just 28 per cent say they feel confident investing their money, compared to 45 per cent of men. Meanwhile, only 13 per cent of women think they have a good knowledge of investments and the stock exchange and only around a quarter say they would know how to find suitable products in which to invest.

Indeed, figures from HMRC show just how reluctant many women are to invest. While 5.2 million women opened a cash ISA account to save into last year, just 892,000 opened a stocks and shares account to invest into. Women are also putting less into these accounts than men, with the average ISA worth £22,680 and £25,459 respectively.

Tracy Browne, wealth management consultant at Salisbury House Wealth, says:

“It’s great to see a number of women using ISAs, but it’s important they adopt the right investment strategy for the long term to start closing the wealth gap. While saving in cash is often seen as the safe option, it’s not the best for long-term savings growth.”

Paying for it in retirement

As a result, women retiring this year will, on average, have 29 per cent less money saved then their male counterparts, according to figures from Prudential. While men can expect a retirement income of £21,800 a year, women are likely to get just £16,900. It’s a difference of £4,900 a year – or a hefty £122,500 over a 25-year retirement.

Worryingly, figures from the Department for Work & Pensions show that this gender gap is only getting worse. Ten years ago, the average retired single woman had an income of £294 a week – just £31 a week less than the typical single retired man. Most recent figures show that gap has now widened to £85 a week, with retirement income of £316 a week for women and £401 for men.

Samantha Seaton, chief executive at Moneyhub, says:

“Too many people are still not saving enough for their future, with women at particular risk of facing a retirement without enough to live on.”

She thinks pension providers, employers and the government should do more to help people get to grips with their finances. But individuals must also take steps to secure their own financial future.

Are women the better investors?

Women might be worried about investing but there’s plenty of evidence to suggest they are actually very good at it. Data from Hargreaves Lansdown found that over the three years to August 2017, female investors saw their investments grow 0.81 per cent a year more than men. A paltry figure now, but if that trend continued over 30 years, the female investors’ pots would be a whopping 25 per cent bigger than the men’s.

Even those who lack the confidence to pick their own funds or stocks to invest in should not shy away from the stock market. So-called robo-advice websites can help make it easier to invest and allow you to start with small amounts – often as little as £10 – which can add up over time.

These sites will usually ask you a series of questions to determine how much risk you’re willing to take and how long you want to invest your money for, and then determine where you should invest your money.

Start early if you can

Other savers may feel more comfortable seeking guidance from a financial adviser who can explain the potential risks and rewards of different investments face-to-face or over the phone.

Whichever route you take, the key is to start as early as possible and keep investing regularly. If you invested just £50 a month for 25 years and it grew at 6 per cent a year, you would end up with almost £35,000. Increasing that to £100 could lead to a pot of almost £70,000 over the same period.

Of course, past performance isn’t a guarantee of future performance. Whatever product or fund you choose to invest in, remember that due to market fluctuations the value of your investment could go down as well as up. This means it’s possible to get back less than you invested.

Written by Holly Black – Financial Journalist


Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decision. The opinions expressed within this blog are those of the author and not necessarily of OneFamily.