A plan to improve women’s financial resilience
It’s International Women’s Day and the financial services profession has been busy putting its best foot forward when it comes to matters of equality and diversity.
On Tuesday, Martin spent a day in London at the Chartered Insurance Institute’s Insuring Women’s Futures Live 2018 event.
This was a day of keynotes speakers, lively panel discussions and practical workshops around the unique risks women are exposed to throughout life.
Also on Tuesday, FT Money hosted a reader event titled Why don’t women invest?
Inspired by Fidelity investment director Maike Currie’s recent FT column and timed to mark International Women’s Day, the event played host to a selection of female fund managers including Stephanie Butcher of the Invesco Perpetual European Equity Income Fund and Alexandra Jackson of the Rathbone UK Opportunities Fund.
And today saw a major event from wrap provider Nucleus, Unlock the value in diversity.
But despite this growing focus on the unique financial challenges faced by women, there is clearly much more to do.
Higher levels of debt, career breaks and lower paid work all put women at a financial disadvantage. As shown by recent statistics released by HM Revenue & Customs earlier in the week, on average women not only earn less but their income peaks at a much younger age compared to men.
In recognition of these financial challenges faced by women, 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. Royal London estimate the total amount of future pension rights lost since the change was made could exceed £1bn.
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.
HMRC figures 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?
Royal London are seeing more couples choosing to live together rather than get married – in 2016 there were 3.2m 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.