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.
The past year has been one in which we have all faced challenges and it has meant real change for many people. The pandemic has impacted many communities, including young people and ethnic minority groups. And it has had a particularly negative impact on women, many of whom have been hardest-hit by dramatic changes to work and home routines, faced furlough and even suffered job losses.
Ahead of International Women’s Day on 8 March, we have stepped back and taken a look at the impact the past year has had on women and their finances1, and what we need to do now if we are not to fall behind in our efforts to ease the burden of the gender pay gap, gender pension and investment gaps that still weigh so heavily on women’s progress.
The results are worrying. Not only day-to-day, 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 potentially rewind progress already made.
According to our findings, 23% of women in the UK have experienced a fall in their income over the past 12 months, to the tune of £463 a month, on average. Add that up over the course of a year and you are looking at a drop of £5,556 - and that is close to a quarter of the average annual salary of £20,515 for women2.
It means that two-fifths of UK women (40%) who have experienced a fall in their income have been forced to dip into their savings to cover daily outgoings, while over 10% have had to resort to borrowing to make ends meet.
While that obviously has an impact on day-to-day living, it is the long term effect that is potentially even more concerning.
Three out of ten women said the amount they have saved in the last 12 months has fallen. Some 17% of women have invested less, while 13% have cut back on the amount they now contribute to their pension savings. And this impact on long-term savings is felt most acutely by women in their 40s, where nearly one in five have reduced their pension savings over the past 12 months.
With women already facing significant gender pay, pension and investment gaps, any reduction has the potential to further push back women’s progress financially. Financial decisions made during the pandemic could have long-term financial implications.
Of course, crises rarely affect everyone equally, and this too was highlighted in this research. One in five (20%) women reported their ability to save and invest had increased during the pandemic, largely due to social restrictions meaning fewer outgoings and more disposable income to put away for the future.
Here are just two simple steps you can take today to ensure the pandemic does not have more of a negative impact on your financial future than it already has.
1. Fix any ‘holes’ in your safety net
There is a very real risk that the coronavirus crisis could set women back in terms of their earning power, with more women than men expected to have had to reduce their working hours in order to cover caring responsibilities, or because they have been furloughed or, worse still, lost their job altogether.
There is also a real danger that many women will have taken their eye off their own future savings and pension plans during the course of the pandemic. However, while it can be tempting to hit the pause button and wait for the current situation to pass; this could cost you in the long run.
By keeping your regular savings and investment plans going, you make sure you keep your future plans on track. Losing out on six months, or a year or two, could have a detrimental impact on your longer-term financial security. And as we have seen time and again, we need every penny we can save to ensure our future financial wealth is in good shape.
2. Don’t forget your future
What’s happening right now may feel all-consuming, but looking past today’s events and keeping a firm eye on the future is just as important as ever.
The good news is employers had to continue to meet their contributions to your workplace pension, if you were furloughed. So, if you could afford to continue topping this up, all the better.
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 any gaps in retirement saving during this period.
If you’re not earning above the £10,000 threshold to qualify for auto-enrolment contributions, consider setting up a self-invested personal pension (SIPP). And even if you don’t work, 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.
In fact, whatever position you’re in, if you can do it, increasing your contributions is the best way to build up your pension pot. It doesn’t have to be by much either. Our research shows that just by contributing an extra 1% of your salary into your pension every month, so about £35 a month on the average salary, you can close the gender pension gap by the time you come to retire.
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
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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