Fraught with obstacles and penalties – the ups and downs of a woman's financial life journey

14 May 2020

Right now, constrained by COVID-19, we’re a nation of cabin fever-consumed runners and cyclists. But in normal times, nearly nine million people in England take part in fitness classes each week -and more than half are women1.

While they might prioritise their physical health, though, too many women pay too little attention to their future financial fitness - and are ill-prepared to deal with the obstacles to financial security they face throughout their lives.

There are, unfortunately, any number of physical, emotional and social demands placed on women, linked to life events, that come with short-term financial ‘penalties’ and longer-term consequences.

The financial hurdles women face

For example, while a young woman is less likely to live at home with her parents than a young man, median rents in England will, on average, snatch away 43% of her salary - versus 28% of his2.

In the same vein, paying for a first home will cost a woman twelve times her salary - but a man eight times his3.

And just to belabour the point a bit: the average cost of living out your later life in a care home in the UK adds up to £132,000 for a woman, compared with £82,000 for a man4.

Then, of course, there’s the fact that women still take on the lion’s share of caring responsibilities for children, grandchildren, or elderly relatives. And to do so, they may work fewer hours and lose the ability to save for themselves and their retirement.

This partly explains why there’s a gender pension gap of nearly 40%5 - and, worryingly, why 1.2 million women who are approaching pensionable age have almost no savings at all6.

The gender pay gap, meanwhile, is currently around 17%7 - with women’s salaries losing ground when they take career breaks. And don’t underestimate the impact of the menopause - it’s not often talked about, but many women struggle with the changes it brings enough to give up work.

Empowerment through early planning

“It feels like everywhere you look, women are being penalised,” says Sharon Bonfield, Advising Women Marketing Lead at St. James's Place. “But that doesn’t mean you can’t do something about it.”

Planning early can stop you being financially disadvantaged by common life events, she says.

“Research shows women are excellent planners. They tend to be good at budgeting and squirreling money away for a rainy day. But their more cautious approach means they’re more likely than men to save in cash rather than invest - which could be an opportunity cost.”

As well as taking the plunge into investing, there are other practical ways for women to plan for and mitigate against the financial impact of marriage, divorce and many other costly ‘milestones’ - with a view to protecting their financial futures.

“And the sooner you start, the better,” says Bonfield. “If I were in my 20s, I’d ensure I was enrolled in my workplace pension. A lot of people opt out at that age because affordability is an issue. But, because of the power of compounding, even a small amount of money put away early can make a big difference later on.”

It’s never too late to get organised

"If you’re now in your 40s, 50s and 60s… well, there’s still plenty you can do", she adds.

If you’ve taken time out of work, for example, check to make sure you’ve made sufficient National Insurance contributions to qualify for the full State Pension - and if not, top them up.

Also, consider taking advice on whether it is better to consolidate your old pension pots to gain control and a better understanding of what you have saved already - there are loads of regulated options to help you track down lost and forgotten pots, including the UK government’s own, free Pension Tracing Service.

Otherwise, look at how much you’ve got saved in cash. Three to six months’ worth of expenses as an emergency fund is ideal - anything more might be better invested. If you’re saving on behalf of a child, for example, you’ll have a long time for the investment to mature and potentially benefit from the year-on-year compound growth of reinvested returns.

And think about protection. Would your family cope financially if you were suddenly unable to do what you normally do? During the current coronavirus crisis, this seemingly remote eventuality has become all too real for many UK families - who have found themselves lacking any sort of financial support system.

All of that said, financial planning should be a family affair, and your partner has a critical role to play too - whether that’s sharing some of the caring responsibility, or paying into your pension while you’re off on parental leave.

The path to financial wellbeing is seldom obvious - especially for women, who encounter a myriad of financial obstacles along the way. Wherever you are in life’s journey, though - and whatever the challenges you face - there’s no substitute for simply asking questions and having a plan in place. This is why taking professional advice is vital and it's where a St. James's Place Partner can help.

So, give them a shout. Your future self will thank you.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.



2 Scottish Widows Women in Retirement Report 2019

3 Scottish Widows Women in Retirement Report 2019

4, 5, 6

7 all employees (both full and part time)