Financial planning for women

Financial planning for women

International Equal Pay Day is on 18 September and, although pay inequalities have continued, women are gaining financial power. It’s expected that more than two-thirds of UK wealth will be in women’s hands by 2025. Financial planning for women is an increasingly important topic for many reasons. We explore the ongoing challenges faced by women.

Pension income

“Women have 51% less in retirement savings”

The Global Women and Money Study 2021 found a big gap between men’s and women’s retirement savings. The gender pay gap is narrowing, but it still exists and is affecting women’s long-term earning power. Nest, the pension provider, reported a gender pension gap of around £41,000. There can be many reasons for this, but one factor is women traditionally taking a break from their careers to raise a family.

When women are not in employment or self-employed, they are unlikely to be making National Insurance contributions (NICs). This has a knock-on impact on their state pension, as well as many other aspects of their savings strategy. You need 35 full years of NICs to be eligible for the state pension. For many women, the state pension alone won’t be enough to support them through retirement, so another type of pension is also needed.

Non-earning women usually lack the funds to put money into a pension scheme, and this can result in a large shortfall when they come to retire. Another compounding factor is the fact women live longer than men, which means they need more pension income. According to the Office for National Statistics, women are expected to live until 83.1 years, compared to men at 79.4 years. The state pension age has also risen to 67 and 68 for many women too.

Making decisions

“58% of women defer to spouse for critical financial decisions”
There is still a large percentage of women who rely on their partners to make big financial decisions. Sometimes, it’s only through divorce or dissolution of a civil partnership that women are forced to take control of their financial situation.

Thankfully, things appear to be changing for the better. Younger generations are more independent, and more women are taking charge of their financial health. In the meantime, there are a number of older women relying on their spouse or partner for decisions relating to big life events. If they do not have the right financial planning in place, they could be disadvantaged when they become divorced or widowed.

An interesting factor is the difference in how women make decisions when compared to men. In terms of investment strategies, women are generally found to be more risk-averse than men. Attitude to risk is linked to the level of returns from investments, and some women may be missing out on greater long-term returns. But, conversely, being more risk-averse also makes women perfectly suited to be involved in those big financial decisions.

Goal planning

“Only 36% of women seek help from a financial planner”

As women gain greater financial power, it’s important they receive the right level of advice. But the main issue is still around confidence. Men are more confident when it comes to financial planning and handling relevant services. We believe this will improve, as women are now taking more control of everyday money matters.

When it comes to the female approach to financial goal planning, women tend to be less detail-orientated than men. They are more focused on the long-term outcomes of a savings and investment strategy. Whether it’s to improve their current lifestyle or retirement planning, women are more likely to consider what the strategy is likely to achieve. This could include being able to pay off the mortgage or making financial provisions for children’s schooling.

If you would like a review from a chartered financial planning firm, please get in touch. Our financial planners will explain the process and help you create a plan, an initial meeting with us is at no cost to you. If you do feel more comfortable talking to a female financial planner, please specify this when you get in touch. We will check for any pay or pension gaps that might affect your financial strategy. We will advise you on tax-efficient ways to make your money work harder for you in terms of savings and investments. Our team will also help you protect your wealth, so you can enjoy your hard-earned money today and in years to come.

Get in touch to book a pension review with our financial planning team.