We’re all aware of the gender pay gap. And, as shown in the Office of National Statistics data below, we can all see that progress has been made but there’s still a lot more work to do. Something we may be less aware of however is how the gender pay gap is inextricably linked to and exacerbates the gender wealth gap.
Source: Office for National Statistics – Annual Survey of Hours and Earnings
The Wealth Equity Index (WEI), developed by Willis Towers Watson (WTW) and the World Economic Forum demonstrates the extent of the gender wealth gap by looking at the level of accumulated wealth between men and women over their career cycles:
The number reached is between 0 and 1. A score of 1 indicates no difference at all, and 0 indicates the greatest possible difference. The index includes 39 countries globally, and the average WEI score is 0.74. This means that globally, at retirement, women are expected to accumulate just 74% of the wealth that men accumulate. Zooming in to look at the scores for Europe, of the 14 countries sampled, only 5 have a better than average score. The UK falls significantly below average with a score of 0.71 - the second lowest in the region.
According to the WEI, the gender wealth gap is a result of pay gaps, delayed career trajectories and responsibilities outside the workplace. For example, females tend to shoulder a greater burden of childcare.
Looking at the UK in particular, the biggest challenges recorded are the lack of affordable and accessible childcare and the disproportionate share of unpaid caring duties that women assume. The report also states that, in general, females have lower levels of financial literacy due to lack of confidence and lower level of risk tolerance compared to men. Over the long-term, this can have a significant impact on accumulated wealth and widen the gap further.
What’s the scale of the challenge?
In 2021, the Money Matters study by AJ Bell reported that the savings gap stands at an eye watering £1.65 trillion. Estimates suggest that £599bn of this is the difference in the Stocks and Shares ISA value between men and women. The study suggests this isn’t a lack of willingness to save (65% of women have a cash savings account compared to 66% of men), but that women are less likely to have an investment account or to be saving into a pension. The biggest difference to saving levels is the average amount saved per month, which stands at £180 for women and £306 for men. Over the long term this difference has a significant impact on overall wealth and financial security.
The lack of savings, particularly into pensions also exacerbates the gender wealth gap. The NOW: Pensions, Gender Pension Gap report 2022 stated that the average pension pot at age 65 in the UK is £111,600. The average size of a man’s pension pot is £205,800, while for women it’s £69,000. That means the pensions savings gap is £136,800 – at age 65, the average pension pot for females is just 33.5%, that’s a third of the average man’s pension pot.
What can we do?
This is a complicated and multi-faceted issue that needs individual and governmental support. Many factors combine to contribute to the gender wealth gap, including unequal distribution of caring responsibilities, the underrepresentation of women in senior roles and high-paying industries, and a lack of financial education.
The onus is on us all to make sure we’re talking about the importance and ease of investing and the positive impacts investing can have on people’s future wealth. By building understanding and confidence in women (and anyone else who needs it) to help them take their first steps in investing we can really make a difference. Women live on average 3.7 years longer than men, so lasting financial security is of vital importance.
We should also be encouraging more women into finance. A report by WealthiHer network, suggests women are more likely to seek advice and have confidence to invest if their adviser is female. We should be doing all we can to break down barriers and attract a better gender balance in our industry, and that will help build confidence for this generation and those to come. That’s why we’re asking people to share their ‘words of wisdom’ ahead of International Women’s Day on Wednesday 8th March. Please share your thoughts and keep an eye on our LinkedIn and Twitter for the results!
Appendix:
Read the eye-opening WEI report here: https://www.wtwco.com/en-NL/Insights/2022/11/2022-global-gender-wealth-equity-report
NOW: Pensions, Gender Pension gap report: https://www.nowpensions.com/app/uploads/2022/10/gender-pensions-gap-report-2022-080622.pdf
WealthiHer Network Report: https://www.kleinworthambros.com/fileadmin/user_upload/kleinworthambros/pdf/The_WealthiHer_Network_Report_2019.pdf
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