Facing an unequal future: closing the Gender wealth gap
By Sophia, Family Financial Planner
Why is the gender wealth gap more important than the gender pay gap?
The gender pay gap is well known – four out of five companies in the UK still pay male employees more than female ones, according to the Guardian’s analysis of the government’s gender pay gap (https://www.theguardian.com/world/2023/apr/05/women-paid-less-than-men-four-out-of-five-employers-uk-gender-pay-gap). Whilst this continues to be shocking, the gender pay gap is unfortunately only part of the problem.
The gender pay gap refers to how much women earn … but the gender wealth gap refers to how much women keep, and it is even worse.
Wealth is created by investing in excess income and cash. It is a better measure of inequality – it consists of savings, investments, property, pensions, etc and these all contribute to financial security and freedom.
My experience as a Financial Adviser has taught me that the wealthiest people are not necessarily the ones earning the most. They are the ones that keep the most.
Why is this important?
Wealthy people have financial well-being.
Financial well-being doesn’t necessarily mean earning lots of money or having a nice car or a massive house. Financial well-being is a feeling – a feeling that you are comfortable with your financial situation – both today and in the future and can enjoy living the life you want.
With living costs soaring, financial well-being will be top of mind for many people right now.
Poor financial wellbeing can lead to anxiety and stress and a recent study by Champion Health noted that financial pressure is the top cause of stress outside of work (37%).
As suspected, money worries don’t have the same impact on everyone. Champion’s data (https://championhealth.co.uk/insights/financial-wellbeing-statistics/) shows that female employees are 33% more likely to experience financial stress compared to their male counterparts.
Additional research from Aon (https://www.aon.com/unitedkingdom/employee-benefits/resources/articles/financial-wellbeing-for-women-in-the-workplace.jsp), suggests there is a significant financial well-being gap between male and female employees.
The gender financial well-being gap is an outcome of the gender wealth gap.
How does the gender wealth gap play out?
The biggest impact I’ve seen on my female clients is at retirement.
At retirement age, women’s pensions are on average only one-third the size of men’s pensions and women statistically live longer so we actually need bigger pensions (https://www.insuringwomensfutures.co.uk/uploads/2017/03/COH_J012646-IWF-Pension-Life-Journey-Report-Update-P2.pdf).
A study by NOW Pensions (https://www.nowpensions.com/app/uploads/2020/12/NP-gender-pensions-gap-report.pdf) showed that in order for women to retire at 65 with the same pension income as men, they would need to work from the age of four…
There are a number of reasons contributing to the gender pensions gap but one of the most common is women traditionally taking time out of work to raise their children.
Women aged 25 taking a 5-year career break will accumulate a pension pot 33% smaller than their male counterparts (https://www.nowpensions.com/about-us/fairpensionsforall/gender-pensions-gap/).
The ownership of wealth between men and women starts to worsen when women reach their 30s. Evidence shows that once women have children, they are more likely to have little, or no savings (https://www.nowpensions.com/about-us/fairpensionsforall/gender-pensions-gap/).
Business ownership is also unequal. 1 in 3 entrepreneurs in the UK are women. Female-led businesses are only 44% of the size of male-led businesses (https://www.taxjustice.uk/uploads/1/0/0/3/100363766/wealth_tax_and_gender_-_final_paper.docx.pdf).
There is also significant bias in the availability of capital for female-led start-ups and this has a knock-on effect on the ability of these businesses to grow – less than 2% of funding goes to women-led businesses (https://www.taxjustice.uk/uploads/1/0/0/3/100363766/wealth_tax_and_gender_-_final_paper.docx.pdf).
How can we close the gender wealth gap?
It all starts with financial education. It is why I launched my Instagram page (@Sophia_Financail_Planner) during lockdown to provide society with financial education as most of us never learn this at school or from our friends and family.
Due to a lack of education, women tend to have lower confidence in money. I believe this also stems from culture – it was only in 1975 that women no longer needed a male signature to open a bank account – and traditionally men have managed the family finances.
Research by the FCA (https://www.fca.org.uk/publication/research/financial-lives-survey-2020.pdf) shows that the majority of people who have low financial knowledge and confidence in managing financial matters were women (60%).
One way for women to improve their financial knowledge and confidence is to seek advice from a Financial Adviser. It is why I chose to become one as, unsurprisingly, only 17% of Financial Advisers in the UK are women – and this number has barely changed for 20 years. I am really proud over 80% of my clients are women (including those in a couple).
Just like with any industry – diversity of gender, thought, race, and socioeconomics is so important. In the world of financial planning and wealth management, we need more women (and diversity in general) because our clients are diverse. People tend to want to work with people they can relate to and therefore to encourage more women to invest and close the gender wealth gap, we need more female advisers to support them on their journey.