International Women’s Day is a call to action to make further progress towards gender equality. While much progress has been made more work needs to be done to improve the financial resilience of women in Britain today.
Higher levels of debt, career breaks and lower paid work all put women at a financial disadvantage. As shown by statistics released by HMRC on the 6th March 2018, on average women not only earn less but their income peaks at a much younger age compared to men.1
Mutual insurer Royal London has put together a five point plan to improving women’s long term financial position.
- Claim what is due to you - Every year billions of pounds worth of benefits go unclaimed by those who need them. For instance recent Royal London analysis showed confusion around changes to Child Benefit led to some 63,000 mothers losing out on National Insurance credits needed to boost their State Pension. We estimate the total amount of future pension rights lost since the change was made could exceed £1bn2.
- Get saving - Auto-enrolment has had a huge impact on the number of women saving into a workplace pension. Recent DWP figures say the percentage of women saving into a defined contribution pension has risen from 40% in 2012 to 73% in 2016. However, current auto-enrolment minimum levels will not provide enough to generate a decent income in retirement. You should look to top up contribution levels wherever possible.
- Start investing - HMRC figures3 show that over one million investment ISAs are held by men compared to just 870,000 by women. A lack of confidence is often cited as a key barrier to women investing but there is no need to invest solely in high risk investments to build a nest egg. A steady return built up over the long term will go a long way towards building a decent pot.
- Don’t rely on others - It can be tempting to rely on your partner if they earn more than you. However, you need to give some thought to how you would cope if you were no longer together. If you are married then you would negotiate a financial settlement as part of a divorce but what if you aren’t married? We are seeing more couples choosing to live together rather than get married – in 2016 there were 3.2m4 cohabiting couples in the UK. However, while these couples can live together for years and even raise children together there is no concept of common law marriage in the UK. This means that if you split up, or your partner dies, you could be left with nothing. It may not sound romantic, but setting up a cohabitation agreement when you move in together can help you outline who owns what. Updating Wills and pension documentation is also vital.
- Get advice where you can - You may be put off by the upfront cost in consulting an independent financial adviser but over time the cost does pay off. An adviser will discuss your long term financial goals and help you put a plan in place to help you achieve them. They will assess your investments to make sure they continue to meet your needs and offer advice on whether you need to put more money away. Recent research by the International Longevity Centre supported by Royal London showed that those who took financial advice in the 2001-2007 period were £40,000 better off than their equivalent non-advised peers by 2012-14.
Helen Morrissey, Personal Finance Specialist at Royal London said:
"Initiatives like auto-enrolment will help women improve their financial resilience but there is more that can be done. For instance we need greater awareness of the benefits available to help new mums accumulate National Insurance credits towards their State Pension entitlement and we must encourage more long term savings and investment behaviours. Once these behaviours become engrained we will see more women building a sustainable financial future."
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For further information please contact:
Helen Morrissey, Personal Finance Specialist
- Email: email@example.com
- Tel: 0203 725 725
- Mob: 07919 170 712
Notes to editors
- HMRC statistics on income (see fig 2.5)
- Press release - New HMRC figures show cause of women’s pension equality set back a generation – Royal London. February 2018
- HMRC ISA statistics
- Royal London policy paper 14 – Could living together in later life seriously damage your wealth?
About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.