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The gender pay gap and what it means for your finances

International Womens Day, Pay gap, Gender equality

The gender pay gap and what it means for your finances

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2 minute read

2018 marks a hundred years of women having the right to vote (December sees the 100th anniversary for women voting in a General Election for the first time) and as a result there is a lot of public attention on the gender pay gap and rewards between men and women. Just consider Iceland, which recently passed gender equality legislation that must be effective from 2022.

Capital operates in the sphere of professional financial planning within the wealth management industry and, as such, wanted to investigate the implications for women when it came to savings, investment, and retirement. Just how equal or fair is ‘Financial Services’ in the UK as a sector when it comes to gender outcomes?

Visually, it is quite striking when you consider participation. Go to any seminar or industry conference and the message is clear – men outnumber women by a huge margin and whilst the margin is narrowing - it is still a gulf.

Financial services isn’t even starting from a good place when it comes to pay because, according to the Financial Times, only the construction sector is worse in the Government’s survey.

In fact, whilst the national median gender pay gap is 9.1%, Financial Services comes in at 24%. Let’s say that again in a different way – for every man earning £1,000 a woman earns £760. The FT article states: “No financial institution pays women more than men.”

Enough of the data; let’s look at actual life experiences for women.

Pensions

women's pension pot

On average, women retire with a pension pot 27% smaller than men and only 40% of these retirees expect to be able to live comfortably. Many simply rely on state benefits.

Pay

Lady at work

According to The Guardian newspaper, women earn £300,000 less than men over a working lifetime.

Career breaks

Lady on maternity leave

This is obvious – a maternity break and childcare needs interrupt a career and earnings potential. The UK ranks 30th out of 33 when it comes to women in full-time employment (Sweden has 60%).

Life expectancy

Happy old ladies

The Office for National Statistics (ONS) shows that on average, women outlive men which, put simply, means that they have to survive on their income for longer. Women significantly outnumber men living in care homes, the ongoing cost of which is substantial.

Divorce

Couple divorcing

For a woman, divorce can be financially harmful, especially if she has postponed a career to raise children. The Chartered Insurance Institute report shows that the average divorced woman has less than a third of the pension wealth of a divorced man. While London is seen as the divorce capital of the world, with women getting huge payoffs that hit the headlines, this is often only the case for the global super-wealthy. Women are often given custody of children, which makes it harder to return to the workplace.

Prudence

Savings

Women are actually good savers, but they tend to prefer cash to investing, and so miss out on significant long-term investment returns. On average, women tend to be more risk-averse than men.

Alienation

The Boston Consulting Group says that two-thirds of women investors switch wealth manager due to the way that they are being treated. With male dominance and a focus on jargon, women are quickly alienated and thus disengage. This is especially true after separation, divorce, or the death of a male partner.

These factors create almost a toxic mix for women, a form of life impairment if left unrecognised.

It really is the time for the financial emancipation of women to take place; for women to be treated fairly, openly, and honestly.

At Capital, we always like to meet both parties in a relationship and plan for them as a couple. We help to educate and inform. Our aim is to reduce jargon and avoid empowering one party more than another. Participation is actively encouraged at all times. Different opinions are welcomed. And just in case it was on your mind, at Capital we don’t have a gender pay gap at all.

If you would like more information on this subject or advice on how to financially plan for your future please contact us. 

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