We already know that women, on average, end up with less savings across investments and pensions when they come to retirement.
We can attribute that to the well documented gender pay gap, career breaks to bring up children or the fact that women usually take less risk with their investments than men do. However, rather than focusing on what we already know, I believe its more important to focus on what we don’t know, as that could be the answer to the gap in retirement income between men and women; the gender investment gap.
Women v Men
On average women have been found to be better savers than men, according to a survey conducted by Halifax Bank in 2013. So even though they may take time out to bring up children or be paid less, women are still better at saving. However, the money that women save tends to remain in cash. On the other hand, men are more likely to consider more risky options such as investments.
If we look back at the stock market and interested rates over the last 10 years, we can evaluate the difference between investing and remaining in a cash account. Let’s assume we have two investors. One invests £1,000 in their bank account which gives them a variable rate of interest in line with the bank of England Base rate. The other invests £1,000 in an ABI mixed investment fund with between 20% – 60% equity content. Over the last ten years the two investments would have performed as follows:
As you can see, although the investment has a much rockier road than the cash, overall it vastly outperformed. Past performance is not an indicator of future returns, however, this example demonstrates how the two investment strategies would have performed relative to each other during that period of time.
Why is this happening?
In my opinion, the reason anyone shy’s away from investments is due to a lack of knowledge or experience. Both of these feelings lead to a lack of confidence in the decisions we make. If you don’t feel confident investing, or you don’t feel you have the required experience or knowledge, you can work with a qualified adviser who has the right training, knowledge, skills and experience to be able to provide you with suitable advice. A specialist financial planner will be able to advise you on how much money you need to invest in order to reach your long term financial goals. They will also be able to analyse the level of risk you should be taking from both an emotional and a capacity perspective.
We can’t change the way companies pay maternity/paternity leave or how they treat employees who need flexible hours to care for others. We also can’t change the fact that in some companies women are still under paid compared to their male counterparts. What we can control is how these women approach investments and help them to understand the level of risk they should be taking.