Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
Just before International Women’s Day, which is today, we decided to take a step back and look at the impact the past year has had on women and our finances1. The findings are stark and reveal that we need to take definitive steps right now if we are to close the gender pay, pension and investment gaps that continue to weigh so heavily on women’s financial security.
The results are also worrying. Not only when you look at the impact on a day-to-day basis, with so many clearly struggling to get by, but also in the longer-term. Because, while the battle for gender equality is far from won, there is now a very real risk that the pandemic could rewind the progress we have already made.
According to our findings, 23% of women in the UK have seen a drop in their income over the past 12 months, to the tune of around £463 a month, on average. Add that up over the course of a year and you are looking at a fall in these women’s income of £5,556 - almost a quarter of the average annual income of £20,515 for women today2.
That is no small sum and it means that two-fifths of UK women (40%) have been forced to dip into their savings to cover daily outgoings. While over 10% of them have had to resort to borrowing - just to make ends meet.
While that obviously has an impact on day-to-day living - and I should add here that women are not alone in having been adversely affected - it is the even more damaging effect on women’s future financial security that is even more concerning. If we allow the pandemic to further disrupt - let alone wipe-out - progress made, we could very well see women paying the price for decades to come.
This is not scare-mongering, this is fact. As many as three in 10 women admit the amount they have saved in the past 12 months has fallen. While 17% of women say they have invested less overall, 13% have specifically cut back on the amount they now contribute to their longer-term pension savings. And this scenario is most typical of women in their 40s - who are at a time in their lives when they should instead be pushing every extra penny they can into their pension pot. Yet, nearly one in five have instead reduced their pension savings over the past 12 months.
This has to cause concern - for everyone. With women already facing significant gender pay, pension and investment gaps, any setback has the potential to not only damage, but reverse women’s financial progress. If that happens the pandemic risks having long-term financial implications on these women and their families for not just years, but decades to come.
There was one chink of light in the research we carried out - one in five (20%) women reported that their ability to save and invest had actually increased during the pandemic.
Whether you are one of these fortunate one in five, or not, the message is clear - every one of us has to take action now to ensure that our financial futures - as women - are not knocked off track forever by the past year of pandemic and uncertainty.
1. Bridge the pension gap all by yourself
By paying an additional 1% of your salary into your pension, as soon as you start your working life, you can close the gap. It is a relatively modest sum (on average £35 a month) which if paid in for the 39 or so years of your working life, will mean you can retire without immediately being negatively-impacted, just for being a woman. For more take a look at the 3 financial problem areas all women need to focus on.
2. Don’t forget tomorrow
Make sure you use your annual ISA allowance. We can each save up to £20,000 in an ISA in the current tax year. As well as enabling you to build a substantial pot of money, which will grow over time, you also shelter all the gains from the tax man. The current tax year ends on 5 April, so take advantage of your ISA allowance before then.
The easiest way to work savings and investments into your household finances is to set up a small but regular monthly sum into your ISA. You can save as little as £25 a month and choose where in the world you invest and what you invest in.
3. Don’t feel you have to go it alone
Women are more likely to take time off to care for family, and this can often result in lower earnings as well as a smaller pension pot in retirement. If you’re not earning above the £10,000 threshold that qualifies you for auto-enrolment contributions, consider setting up a self-invested personal pension (SIPP).
It’s worth remembering too that partners who are in full time work, or with extra savings to spare, are permitted to make contributions to your pension on your behalf, so you don’t suffer from any gaps in retirement saving during any periods out of paid work.
Even if you’re not earning a penny, you or your partner can still pay in up to £2,880 a year, which with tax relief could bump up the total to £3,600.
Today is International Women’s Day and the message could not be clearer - your financial security is - and can only ever really be - in your hands.
1 Research conducted by Opinium research between 7th January and 12th January 2021 among 12,038 men and women in the UK, Germany, China, Taiwan, Hong Kong and Japan.
UK sample of 1000 men and 1000 women.
2 ONS, Annual Survey of Hours and Earnings
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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