The Gender Investment Gap

Closing the gender investment gap

Women are poorer than men, according to stockbroker AJ Bell’s Money Matters survey. When you examine Brits’ total savings and investments, including their cash savings, pensions, investment accounts and other assets, men have £1.65 trillion more than women. In particular, pensions and investments represent a large part of this yawning chasm, at £1.26 trillion, with women’s pension savings on average 35% lower than men’s.¹

So why is this the case?

Some fairly obvious reasons play a part: career breaks to have children, part-time income surrounding caring, and the gender pay gap all filter through to lower incomes and smaller contributions to pensions and investments. Perhaps less obvious are attitudes to risk: 71%¹ of women say they would rather not take risks, in exchange for lower rewards in the future. Given that investing must involve risk, it seems many women are missing out on the extraordinary wealth creation that stock markets can produce over long stretches of time.

Here are the four steps to helping close the gender investment gap:

1) Plan for a career break

Pensions contribute enormously to wealth later on in life, particularly as investments today have an outsized effect further down the line, due to the power of compounding. If a career break is in the works, such as starting a family, going traveling, or delving back into education, it’s a good idea beforehand to increase your pension contributions as much and as early as possible.

If you’re enrolled in a workplace pension, check if your employer will contribute more than the 3% required by law, which they may do if you up your additional voluntary contributions. It’s also worth checking with your employer if they will contribute more if you switch to salary sacrifice: giving up part of your salary in exchange for higher pension contributions.

2) Track down your lost pensions

Especially if you’ve moved around quite a few jobs, track down your old pensions and consolidate them under one roof using a self-invested personal pension (SIPP). While each pot may be individually small, they all add up and will serve to boost your pension firepower.

If you’re wondering where they all are, not to worry – use the government’s free Pension Tracing Service. The government’s Money Helper website also contains lots of free tools to help you understand your pension and calculate your projected income upon retirement.

3) Review your investment choices

It’s clear from the research that women appear more risk-averse than men, and yet it’s important to take appropriate risks with our money if we are to build wealth. Appreciating the mechanics of markets over time helps in this regard. While stock markets do drop from time to time – periods usually well telegraphed by the drama-hungry media – over longer periods of ten years or more, history shows that they tend to go up. This means that if you’ve got plenty of time on your hands for certain financial goals – retirement saving being the obvious one here – then stock markets become less scary places.

What’s more, investment risks can be managed by putting your money in well-diversified portfolios of shares with fund managers making investment decisions, as is the case with Alliance Trust – an investment trust with more than a century of history, with ten stock pickers choosing shares from markets around the world.

4) Face up to cashflow realities

A surprising number of people do not claim the child benefits and free government childcare hours to which they’re entitled. Yet this frees up cash. Many women also tend to deal with childcare costs alone, and yet this is a burden that should be discussed and shared with your partner. If they are continuing to save and invest, you should be able to do the same.

Marcus de Silva is a Freelance Investment Writer.

This information is for informational purposes only and should not be considered investment advice. Past performance is not a reliable indicator of future returns. The views expressed are the opinion of Towers Watson Investment Management (TWIM), the authorised Alternative Investment Fund Manager of Alliance Trust PLC, and are not intended as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell any securities. The views expressed were current as at October 2023 and are subject to change. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. You should not assume that any investment is or will be profitable. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

TWIM is authorised and regulated by the Financial Conduct Authority. Alliance Trust PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office: River Court, 5 West Victoria Dock Road, Dundee DD1 3JT. Alliance Trust PLC is not authorised and regulated by the Financial Conduct Authority and gives no financial or investment advice.