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Better financial education needed among UK women

By Ellie Duncan

Many people are guilty of not putting aside enough of their earnings each month, or cannot resist spending their disposable income on holidays, or eating out. But is that the reason women in the UK are not saving and investing enough?

The lack of significant savings among UK women is often down to a simpler reason – they do not have enough money.

The gender pay gap in the UK, which is the difference in average earnings between men and women, is currently 18.1 per cent – the lowest level ever, according to the Government Equalities Office.

Some of the reasons women continue to be paid less than men is due to more women in part-time jobs, or in lower paying industries.

Women also typically shoulder the burden of childcare or caring for elderly parents - roles which go unpaid.

According to UN Women, in the European Union, 25 per cent of women report care and other family and personal responsibilities as the main reasons for not being in the labour force, versus only three per cent of men.

The UN Women ‘Progress of the World’s Women 2015-2016’ report suggests this disparity has worsened since the global financial crisis in 2008.

The report states: “Policy makers in rich and poor countries face huge challenges in creating enough decent jobs for all those who need them. And austerity policies in both developed and developing countries are shifting the burden of coping and caring back to families and onto the shoulders of women and girls.”

© UN Women/Ryan Brown

Another reason women are not saving as much as men is a lack of disposable income.

More than 50 per cent of women without financial investments in Britain cite a lack of funds as the most common barrier to investing, according to the research among 2,065 UK adults by YouGov on behalf of digital wealth manager Moneyfarm. The survey found almost one in four, or 24 per cent, say they do not have any disposable income in a typical month, compared to 14 per cent of men.

Even among those women who are able to invest some of their income, three times as many men have investments worth between £50,000-100,000 in comparison to their female counterparts. Men are also seven times more likely to add funds to their portfolio of investments on a weekly basis than women, according to the survey results.

Importantly, the research revealed 46 per cent of women do not have any financial investments at all.

While this could be down to a lack of income at their disposal, it also suggests the financial services industry is leaving behind a large part of the population, either by not providing products and services that cater to them or by not communicating the importance of being able to save for the future.

Paolo Galvani, chairman and co-founder of Moneyfarm, says he commissioned the research to raise awareness of the disparities between genders and to help drive equality, particularly within investment.

“In today’s world, it is incredibly disappointing so many more women than men are prevented from investing in their future due to a lack of disposable income,” he said

“And it is equally unfortunate to see this gender bias extend beyond simply the ability to have financial investments, given men are likely to more regularly contribute to their portfolio, and have more money invested overall.”

Mr Galvani suggests: “The industry needs to look at the way it talks to consumers to make investing seem a little more tangible and real. A change in the way the industry talks to consumers could really help with financial education. That’s often the first stumbling block – a lack of understanding and assuming ‘that’s not for me’.”

A lack of financial knowledge leaves women less empowered, whether that's in the home or the workplace.

The ‘Progress of the World’s Women 2015-2016’ report indicates that governments and the private sector are starting to embrace the need for women’s economic empowerment.

The report states: “Some see in women a largely untapped market of consumers, while others speak about the opportunity of ‘unleashing the economic power and potential of women’ as a means to solve the persistent problems caused by the global financial crisis and stalled growth.”

But it also warns: “Some patterns of economic growth are premised on maintaining gender inequalities in conditions of work and earnings and enforcing unequal patterns of unpaid work that consign women to domestic drudgery.”

Even though the gender pay gap in the UK is shown to have narrowed, women still have less confidence than men in dealing with their finances.

This could hark back to the traditional roles men and women played in homes, with men historically taking more responsible for household finances.

Research by the Pensions and Lifetime Savings Association (PLSA) among 1,001 men and women aged between 18 and 35 years old, often referred to as ‘millennials’, found women more “financially anxious” than their male peers, even though the pay gap is at its narrowest for this age group.

The women who were polled were less optimistic about career advancement (55 per cent of women, compared to 61 per cent of men) and almost twice as likely to report a decrease in their salary over the last six months.

The UN Women report acknowledges: “Due to their unequal employment opportunities and predominance in low-paid occupations, women are particularly vulnerable to economic insecurity and financial dependence.”

However, there are signs of change in the UK, with the government having introduced mandatory gender pay gap reporting among firms with 200 employees or more.

Requiring companies to publish their data on any differences in pay between men and women may help encourage businesses to redress any imbalance.

Closing the pay gap should mean women will have more disposable income, putting them in a better financial position.

According to UN Women, no country in the world has yet achieved gender equality and at the current rates of progress, a gender pay gap will persist for another 70 years.

When it comes to pensions, the automatic enrolment scheme recently implemented in the UK is helping boost women’s pension pots.

Since 2012, the scheme has required larger employers to set up a workplace pension and automatically enrol all eligible employees, which includes those working full and part-time, as long as they are earning more than £10,000. Those earning less than £10,000 but more than £5,876 can opt in.

By 2018, employers of all sizes will have to provide such a scheme.

Graham Vidler, director of external affairs at the PLSA, says: “Typically, women have had smaller pensions than their male counterparts but with the advent of automatic enrolment, more women are being encouraged to save than ever before.”

He adds: “Not only will they benefit from employer contributions and tax relief, but also gain peace of mind for the fact that they are taking proactive steps to building a better standard of living in retirement.”

The economic empowerment of women is one of the key issues being addressed by UN Women, which states on “Given wide gaps between women and men in access to jobs and other economic assets, policies deliberately crafted to close these stand a far greater chance of improving women’s lives and advancing gender equality”.

Elsewhere on the website, it states: “We need to address the structural causes of inequalities with specific policies. To address gender inequality in pay, governments, employers and trade unions can focus on an array of solutions from national minimum wage policies to providing well-paid, protected public sector care jobs to ensuring that equal pay laws are implemented.”

The provision of financial education for women and the creation of a fairer economic system that supports women throughout each stage of their life in the UK will be hugely beneficial for those who feel left behind by the current financial system.