We've all heard about the gender pay gap. Sadly it's not just an issue with salaries. The effect of men and women being on an unequal footing extends further than the workplace. By earning less, women can’t save as much as men into a pension. They also don’t get as much in employer contributions. The end result is a gender gap in retirement income too – 11% on average, actually.
So says Fidelity, a firm which invests people’s savings for them. It’s come out with a big old study identifying why women are so underfunded. The findings point to the gender gap as well as the fact women tend to take time out to raise children or care for relatives. There's also the usual time constraints, interest levels and so on.
It inspired me to compile my own list of reasons why women (in general, there are exceptions) don’t invest (in pensions and elsewhere). How many of these apply to you?
1. All those numbers – I don’t understand it.
2. It’s too boring.
3. I don’t know where to start.
4. I haven’t got the time to figure it out.
5. I’d rather put my money in cash where it’s safer.
6. I leave it up to my partner/husband to do it.
7. I don’t have any money.
8. My house is my pension.
9. My employer contributes to my work pension, I haven’t got around to it.
10. I’m self-employed.
11. Investing is all men in suits. It’s not really for me.
12. I can rely on the state pension.
They are all perfectly valid reasons but if you ticked more than three or four of the above, you could be facing a less than optimum retirement. There are arguments against all of them, of course, with the possible exception of number 7. For example, not many people realise cash isn't necessarily safer: its value is eroded by inflation over time whereas investments tend to stay ahead of inflation. Another important point is that the full state pension today (if you qualify for it, you may not get it all) is £8,546.20 ie diddly squat. But if this doesn't get you over the hurdles to start saving, what will?
Fidelity’s solution is that women can close the pension gap by saving an additional 1% of their salary early on in their careers. This equates to an extra contribution of just £35 per month on average for 39 years. Which is all well and good if you keep working throughout and you’re starting now. What about us oldies?
If you can save and are prepared to get over the hurdles mentioned above, there’s still time. You can start a regular plan from just £25 a month with Fidelity and finance firm Hargreaves Lansdown. See our guide to starting out here. Alternatively you could pay into a private pension or a workplace scheme if your employer offers one.
If not, and we can't do it for ourselves, we can at least try to do it for our kids. In a quick survey of my female friends, those who do invest tend to have been encouraged in their youth by grandparents or parents who had an interest in the stock market. Even if we can't fill that exact role, maybe schools can. The current curriculum focuses on money matters though PSHE lessons but it's not enough. There should be a practical maths module - covering mortgages, debt and investment - which starts in primary and goes all the way through secondary. If the government and the investment industry really want to help, this is where they need to focus.