Five home truths every woman must face up to

Emma-Lou Montgomery
Emma-Lou Montgomery
Fidelity Personal Investing22 December 2016

To paraphrase Tammy Wynette's 1975 hit "Stand by Your Man", sometimes it’s hard to be a woman. In fact, according to one recent report1, it’s blatantly apparent that being born with the chromosomes XX can put you at a financial disadvantage almost from word go.

From getting paid less than our male counterparts, to taking career breaks to have children, women’s working lives very often stumble before they’ve even got started. Couple that with some sort of apparent innate female reluctance to give more than a passing thought to our future financial security and you soon realise that being female can be seriously risky.

Risky women

Even women’s life expectancy counts as a negative.  We might live longer, but we’re massively unprepared for it financially. According to figures from the Chartered Insurance Institute (CII) the average man accumulates five times the pension pot of the average woman. 

And living longer also increases the odds of us getting ill or living with a long-term health condition, that could mean we need care. It’s estimated that 31% of women aged 65-79 will need help with their day-to-day living and that rises to 61% of those over the age of 802.

As a result women face far higher care costs than men. At age 65, on average a woman can expect a future cost of care (including residential costs) of £70,000; nearly double that of a man of the same age of £37,0003. While figures show that a woman entering a care home between the age of 65 and 74 can expect to stay for four years at an average cost of £132,000. That’s no small sum, yet over half of women in their 30s admit to not having even given a passing thought to how they would pay for those sorts of care costs4.

Women clearly face some very different financial risks to men. So, it’s time to shake things up, take control and make our financial futures more secure. Here’s what you need to know:

1. Career breaks can be a killer

Women now earn the same as men in their 20s, but men overtake them by the time they’re 30. That’s not helped by the career breaks that many women take when they have a baby or when they’re relied on to step in as the full-time carer of an elderly relative.

Not only do these career breaks have a potentially damaging effect on earnings, and can also thwart a woman’s rise up the career ladder, but they also have a detrimental effect on her pension entitlement many years down the line. However, that is something you can do something about right now.

If you take time out of your career to bring up a family you must register for child benefit, even if you know you won’t qualify for the monthly payment. That’s because by registering you make sure you receive the National Insurance credits that will help you qualify for a state pension. For more take a look at 3 things you must do to protect your pension.

You should also check whether there are any gaps in your National Insurance record. You may be able to fill in any gaps by making voluntary payments; your National Insurance record will tell you how much this would cost you. You should contact HM Revenue and Customs (HMRC) if you think your record is incorrect.

2. Longevity can be a curse if you’re not prepared

Being ill unprepared to cope with ill health is foolhardy and high risk. As the figures above show, care costs and we should all be prepared for it in our later years. No one plans to be ill but you have to plan for care costs.

One way to save in a tax-efficient way, that doesn’t require huge sacrifice and gives you full flexibility to use the money for something entirely different if the need for long term care doesn’t arise, is to use your annual ISA allowance.

With the ability to save up to £15,240 every tax year in a stocks & shares ISA (in the 2016-17 tax year) you can quickly save a substantial sum, that will grow nicely over the years. Make investing in your ISA manageable and automatic by saving as little as £50 a month. And take control of what you invest in by choosing from our range of funds in the Select 50.  

3. The generational balancing act has to be kept in check

A fifth of women at any one time are providing care to a sick, disabled or elderly person. By the time they’re in their early 40s, one in seven women will have the combined task of looking after both their own children and their elderly parents.

Women who face these demands on their time are unlikely to be earning in a full-time role, if at all. However, you should try not to abandon your longer-term financial plans. You can still save into a SIPP even if you’re not working. If you pay into a pension scheme you benefit from basic rate tax relief (20%) on the first £2,880 a year you put in. Under current tax relief rules, the government will top-up your contribution to £3,600.

4. Women must learn to put themselves first

It’s not only when it comes to pensions that men do better than women. Figures from the Chartered Insurance Institute (CII) also show they win in the savings stakes too. A man in his late 30s will typically have 60% more in savings than a woman of the same age.

It all starts on an even keel. In their 20s the savings levels of men and women are roughly identical. It’s when women hit their 30s that the savings habit dies off, with women on average having around £1,000. For women who are mothers though it becomes blatantly clear that their priorities change and their savings decrease; almost with every child they have.  The CII figures show that a woman with three to four kids will have just £100-£200 in savings in her name.

Lower earnings for working mothers and part-time roles can be to blame, but so can simply failing to consider your own needs. While your children may well be your priority, remember you’re important too. Putting at least something aside for yourself financially isn’t selfish, it’s essential.

 5. Relationships can break you financially

Separation and divorce create significant financial risks for women. And as it’s estimated that around two out of every five marriages among UK couples will end in divorce, it’s important to know the facts.

Pensions are a crucial part of your future financial security, so have to be given serious attention, yet figures show that women do worse out of divorce than men. Average pension pots for divorced women are worth approximately £9,019 compared with £30,341 for divorced men, according to the CII.

Your ISAs and other investments and your will are other areas that also need to be considered in the event of a relationship breakdown. Keeping a tight grip on what’s yours is vital to your future financial security, so for more take a look at Getting divorced – 3 things you must do.


1 The Chartered Insurance Institute, “Women’s Risks in Life”, 2016
2 Health Survey for England, 2014
3 Based on Forder and Fernandez, 2012, figures uprated using CPI.
4 CII, 2016

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