A recent report from Fidelity International has suggested that women could close the current gender pension gap above 10% by dedicating an additional 1% of their salary towards their pension early on in their careers.
This increase would be translated into some £35 per month in contributions over 39 years, according to Fidelity International’s Financial Power of Women report.
Without taking action, it will take more than 200 years to close this gender pay gap, with a glaring pension gap further underpinned by societal “penalties”.
Fidelity International’s report also found that 52% of women holding a pension do not know where it is invested, while 37% do not know how much their pensions are worth.
When it comes to saving into an Individual Savings Account (ISA), women prefer cash while men favour stocks and shares ISAs. Some 67% of women surveyed believe property offers an equal or greater security than investment products. Fidelity International’s analysis showed that if women had used their full allowance in a stocks and shares ISA over the past four years, investing this money into the FTSE All Share, the initial investment would have delivered a return of more than 25%, meanwhile leaving their savings in cash would have yielded a return of just 0.44%.
Based on the UK’s Office for National Statistics (ONS) projections and adjusting for inflation, the average pension pot for a man currently aged between 25-34 will be worth £142,836 at the State Pension age of 68, falling to a pot of £126,784 for women – a gender pension gap of almost 11%.
This is primarily a result of women still earning less and taking time away from their careers to raise children or to care for a sick or elderly relative.
The Financial Power of Women report used research among 2,000 people across the UK (1,000 women and 1,000 men) and found that the barriers that stop women from investing include salary limitations, household costs and chores. Some 23% said a reduction in household costs would help them to invest monthly and just under a third of women said that a salary increase would encourage them to invest, underpinning the fact that the gender pay gap is still a factor holding women back from taking more risk with their earnings.
A lack of trust and understanding when it comes to the investment industry is another issue. Over one in ten women do not feel at all comfortable choosing financial products and services – twice as many as men. More women than men described the way investment is communicated as ‘complicated’, ‘incomprehensible’ and intimidating.
In order to address these issues and help women to get invested, Fidelity International will use the analysis from its report to inform its Fidelity Women & Money Innovation Labs, which will bring together industry, government, influencers and the media to identify ways of unlocking women’s financial power.