The women’s guide to financial wellbeing

Unfortunately, when it comes to long-term savings like pensions and stocks and shares ISAs, all the stats and evidence show a significant gender gap, with women some way behind men.

Just take a look at pensions. The latest Vitality research reveals that, on average, a woman's pension pot is 30% less than a man’s and over half of unretired women say they cannot afford to save for later life.

Women are also far less likely to have savings outside of a workplace pension and a quarter have no pension pot at all.

This reflects a recent YouGov report which suggests that over half of women aged 35-plus have just £1,000 or under in their retirement fund.

Retired women in Britain are living on £26 per day, compared to £44 for men, according to the latest figures from Women Against State Pension Inequality.

Why do women find it harder to save?

There are several key reasons why it’s often more difficult for women to save than men.

• The gender pay gap. On average, women have lower earnings than men and, added to that, they are more likely to work part-time. The gender pay gap currently sits at 15.4% for full-time employees; that gap is much higher for women over the age of 40.
• Career breaks. Women’s long-term finances can be affected by extended career breaks, especially since they are far more likely to take on caring roles to look after children or care for elderly relatives.
• Investment style. When it comes to investing, although more women have ISAs than men, they are mostly ‘safer’ cash ISAs, whereas men are more comfortable investing in stocks and shares ISAs (which have more potential to grow your money, but could lose value if the stock market falls). This risk-averse attitude is perhaps not surprising: research shows that 90% of financial articles targeted at women focus on spending less, while 73% of articles targeted at men are about investing and growing wealth, says Clare Seal, Financial Coach and Author of Five Steps to Financial Wellbeing.

How to talk about money

Women can find it difficult to talk about finances beyond the everyday household bills, says Financial Educator Emilie Nutley of She Does Money.

“It is important to talk about money with friends and family,” says Emilie.

Clare agrees and says through conversations with other women, we can help to spread knowledge about savings and investments.

Getting to grips with your partner’s approach to money and sharing wealth is also vital. Prema Sohun, Vitality Technical Marketing Manager, suggests a monthly ‘financial date’ with your partner where you review one another’s financial values and goals before deciding how much financial independence you both need.

Get yourself up to speed with how to manage money so you are able to have informed conversations with your partner and make decisions together.

The Open University runs a free money management course online, while excellent books include You're Not Broke, You're Pre-Rich by Emilie Bellet and Open Up: Why Talking About Money Will Change Your Life by Alex Holder.

How to increase your savings

Investing rather than saving money is the most effective way to get a good return, particularly if you don’t need access to your cash in the short term.

Women are often more financially risk averse because they have less savings to invest, but it is usually a gamble worth taking.

“If you don’t invest money and only save, your savings will decrease in value at the moment because interest rates are so low,” explains Clare.

To get comfortable with investing, start with a lower risk level and smaller amount, before increasing these as you get more confident. Investing over the longer term will help your funds to recover from any losses.

“Statistics show when women do invest, they are better at it,” says Clare.

Use a robo-advisor app – an automated service that helps people hit their financial goals and spread the risk – such as Moneybox or Nutmeg. Or speak to a financial advisor or financial coach if the fear element is holding you back.

When it comes to taking greater risks, “it’s all about investing in yourself” believes Prema.

How to boost your pension

Here’s our 10-point plan to get your pension as healthy as possible.

1. Do a financial audit to see how much money you have in savings and pension pots, particularly if you have changed jobs several times. If you work part-time, check to see whether you are eligible for automatic enrolment or not.
2. If you plan to take maternity leave, find out whether your employer will continue making pension contributions and at what rate.
3. Another option to lessen the impact of pension shortfall, if you’re having a baby, is to take advantage of shared parental leave. This allows new parents to share up to 50 weeks of leave and 37 weeks of pay between them.
4. Don’t assume a state pension and a workplace pension will be enough. “Although a workplace pension is a good first step, our data suggests that women may be relying on this to see them through their entire retirement, which may not necessarily be enough for the kind of retirement they envisioned,” explains Sohun.
5. If you can, up your pension contributions, particularly as some employers will match the extra amount you put in. Nutley suggests increasing your pension contribution by 1% every year if you can. This gradual change means ‘it then doesn’t feel like too much,’ she says.
6. Open a private pension to sit alongside your workplace pension. And remember, even if you take an extended career break, it is still possible to save into a private pension up to £2,880 a year, to which Her Majesty’s Revenue and Customs (HMRC) adds £720.
7. When it comes to the state pension, make sure you qualify for the full amount and top it up with voluntary national insurance contributions if you think you’ll fall short of the criteria, which is 35 years. (You’ll receive a proportion of the pension if you have between 10 and 35 qualifying years.) You can check your national insurance record here and your state pension forecast here.
8. Claiming child benefit can also help to top up your national insurance contributions when on a career break.
9. Understand your entitlement to your partner’s pension in the event of a divorce. Only 12% of divorces result in any pension division, but a conversation about it should be high on your priority list. For example, “If you have taken on a caring role so your partner wouldn't have to, then you are absolutely entitled to pension compensation during a divorce,” says Clare.
10. Be prepared should the worst happen and your partner dies. “Understand the type of pension your spouse has and make sure the expression of wish form is up to date and you are formally named as the beneficiary if you are not married,” says Prema.

There may be difficult times in your life when a pension is the last thing on your mind, but this is usually when it is most important.

And ultimately, says Prema, “Women tend to live longer so we need to think more about finances.”

*With some types of investing, your capital can be at risk. If you’re unsure about the right choices for you, please speak to an authorised financial adviser. You can find one at unbiased.co.uk.