In 1973, the first women joined the London Stock Exchange in a significant step forward for gender equality in financial services.
Many great strides have been made in gender equality since then. Yet 50 years later, there are still financial inequalities between men and women. For example, at the current rate of progress, it will take another 50 years to close the gender pay gap according to a pwc report.
What’s more, Legal & General reports statistics that show, on average, women retire with a pension pot that is half the size of their male counterparts.
While the causes of these gaps are complex and multifaceted, there are some steps that every woman can take to improve her financial wellbeing. Read on for five examples that could help.
1. Make the most of employer-matched pension contributions and tax relief
If you are employed and your company offers employer-matched pension contributions, it could be worth making the most of this.
An organisation is obliged to contribute 3% of your salary to your pension on top of your 5% contribution. Some companies go above and beyond this requirement and match the percentage of pension contributions that you make up to a higher threshold.
When you and your employer contribute to your pension, you receive tax relief at your marginal rate of Income Tax. So, if you’re a basic-rate taxpayer, a £100 contribution will only “cost” £80 because the government tops this up.
For higher- and additional-rate taxpayers, this would only “cost” £60 or £55, respectively.
It’s important to note that most pension providers will only add 20% tax relief automatically. So, if you’re a higher- or additional-rate taxpayer, you’ll need to claim your additional tax relief through your self-assessment tax return or by contacting HMRC directly.
By making the most of employer-matched contributions and tax relief, you could significantly boost your pension pot. Over time, this can help you to build a larger pension pot and give you a greater chance of achieving your retirement goals.
2. Ensure your investment portfolio is balanced appropriately for your circumstances
Multiple scientific studies have found that women tend to take less risk than men when investing. While this isn’t necessarily a bad thing, lower risk investments tend to have less scope for generating high returns. As such, you could find it more difficult to achieve your financial goals.
So, when building your investment portfolio, make sure your holdings are diversified and that you have taken an appropriate level of risk for your circumstances and goals. We strongly advise you to consult a financial planner for guidance when selecting your investments.
3. Claim National Insurance credits if you take time out from your career to have children or be a carer
The Trades Union Congress reports that women are seven times more likely than men to take time out from their career to care for their family or raise children. This can be a key factor in the imbalance between men and women’s finances.
If this is something that affects you, one of the things you could do to mitigate the impact on your long-term financial wellbeing is to claim National Insurance credits during this time. By neglecting to claim the National Insurance credits that you are owed, you could risk retiring with a shortfall of credits for your State Pension.
The State Pension is an important part of retirement planning. In 2023/24, the full State Pension is worth £203.85 a week. The triple lock commitment by the government means that the State Pension will rise each year in line with the highest of:
- Inflation
- Average wages
- 2.5%
So make sure you can receive the full State Pension amount when you retire by claiming the National Insurance credits that are available to you.
4. When your salary increases, consider saving or investing the additional income
As your salary increases over the course of your career, it’s easy for you to increase your expenses at the same rate. While it’s important to enjoy your income, it could be helpful to consider saving or investing some or all of the additional income.
Whether you choose to boost your cash savings, invest your income, or increase your pension contributions, your pay rise could help to improve your long-term financial wellbeing.
5. Consult a financial planner
According to research by the Financial Services Compensation Scheme, men are more likely to seek financial advice than women. This suggests another reason why, on average, women are retiring with smaller pension pots and feeling more worried about money.
Working with a financial planner can boost your financial wellbeing in several ways, including:
- Helps you to balance your investment portfolio appropriately, so that you have the greatest opportunity to generate positive returns
- Puts financial protection in place so that you don’t suffer financially if you can’t work for an extended period of time due to illness or injury
- Helps to improve the tax efficiency of your savings and investments.
Above all of this, though, is the peace of mind that your planner can provide. In fact, the Actuarial Post reports that people who have taken financial advice feel that the peace of mind they gain is its greatest benefit.
Get in touch
If you’d like to learn more about how we can help you to overcome the financial gender gap and improve your financial wellbeing, please get in touch.
Email us at financial@barwells-wealth.co.uk or call 01273 086 311.
Please note
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
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