The number of women in the workforce has increased steadily over the last 20 years and 72% of women in the UK now work either full or part-time.
But women still earn less, feel less financially secure, save less for retirement and face more hardship in later life than their male colleagues.
There are lots of factors that influence this financial imbalance, from gender pay gaps, to the availability of good quality flexible roles to support parents. Women’s traditional role as carers and the impact of the menopause can also have an impact on both career progression and pay rates.
Many of these issues require wide business and social change. But employers can also help women improve their wealth right away by giving them access to guidance, advice, support and financial products that will build resilience and help everyone achieve long-term money goals.
Financial building blocks such as budgeting, creating a financial safety net, clearing debts and investing for the future are vital parts of everyone’s financial wellbeing. Because women’s career paths and earnings patterns can differ significantly from men’s, women may need different information and advice in each of these areas.
One-size-fits-all financial guidance that assumes a linear increase in earnings throughout someone’s career, or is based on someone working full-time for 40 to 50 years, may not give women the support they need. That could also be true for men who choose to take time out to share parental duties as well.
The building blocks of women’s financial planning
The first step for any financial planning is to help someone work out a budget and understand both where money is going currently and where they would like it to go.
That means identifying essential expenditure, such as rent or mortgage and bills, and non-essential expenditure such as subscriptions to services that could be cancelled or reduced if need be.
Having a budget can also include putting money aside to build a financial safety net that provides protection for any essentials during unexpected falls in income, or reasonable increases in bills.
Building an emergency fund gives everyone financial resilience – whether that’s confidence in covering day-to-day worries such as replacing household appliances or a financial buffer to protect against any future loss of income. This can be a simple cash ISA that is readily available for emergency needs.
Paying off debt
Helping everyone avoid high-cost debt, such as using credit cards if the balance isn’t paid off each month, is another important stepping stone to financial planning. Creating a plan to pay off short-term, high-cost debt over time, or consolidating multiple debts into a single loan can help.
This can also link to budgeting. Seasonal costs such as Christmas, birthdays, holidays and even school uniform purchases can put a strain on finances. Planning in advance to cover those costs may mean having to borrow less or put payments onto credit cards.
Paying off longer term lower interest forms of debt, such as mortgages and student loans, when there is spare money to do so could be particularly important for women, freeing up funds later in their working lives to save for retirement and offset the impact of career breaks or ongoing childcare.
Saving for retirement
Preparing for retirement is one of everyone’s biggest long-term financial priorities. However, at present women’s pension pots tend to be 25% to 45% smaller than men’s when they reach retirement. And, women typically live longer than men so may need their pot to last longer.
It’s tempting to simply see this difference as a product of current gender pay gaps, combined with a greater likelihood of women working part-time or taking career breaks. But employers can help women take every opportunity to maximise their retirement savings and help to reduce the gap.
Everyone can find it difficult to picture their future self. Helping women to identify the type of lifestyle they want in retirement and how much they need to save to achieve that lifestyle brings retirement to life and helps employees get control over their retirement planning. This is particularly important for women because intermittent working patterns can make it difficult to keep track of the big picture of retirement planning.
Financial guidance and advice
Women are often reluctant to seek financial advice, or, if they only have minimal savings, find it difficult to access the support or advice that they need at an affordable rate. That can impact the way that women grow their wealth for the future, especially when it comes to investment.
Research from Cass Business School found that women are often more risk-adverse than men when it comes to investment decision-making. That can have an impact on long-term financial planning and women’s ability to save effectively for the future.
Not every woman is the same, and there are many other factors that affect risk appetite, including age and financial literacy. However, taking generic trends about women’s investment preferences into account can help to focus financial advice and information to overcome barriers. Part of this process could be guiding women towards appropriate investment products, ensuring that they invest tax-efficiently, and meeting their personal financial goals.
Deciding how best to use retirement savings to create an income in retirement, whether as cash, drawdown or to buy an annuity can have tax ramifications and impact someone’s income for the rest of their lives. As women’s retirement savings are often lower than men’s, financial guidance or advice is particularly important at this stage.
Financial care for carers
Caring – whether for children, adults or both – can take a heavy mental, physical and financial toll. The majority of caring responsibilities still fall to women, so it’s particularly important to help female employees plan a secure life for themselves alongside caring responsibilities now or in the future.
For employees who care: By helping women to start their financial plans early, they can factor in potential reduced income as a result of caring over the long term. It’s also important to review plans regularly and to make sure that savings are tax-efficient. Staying on top of any state benefits available to working carers is also important, as these can change over time.
For the people they care for: Caring for elderly relatives can bring extra financial worries, whether that’s ensuring that the right documents are in place to support financial decision-making on relatives’ behalf, or having peace of mind about how care costs might be covered. Support in creating a Lasting Power of Attorney or will, as well as understanding inheritance tax are important both for employee carers and those they are caring for.
Review pension scheme design
Review pension scheme design
The design of a company pension scheme can make a significant difference to women, and Mercer Marsh Benefits can help make sure it’s optimised to do so. For example, that could include making sure that tax is paid as Relief at Source (rather than Net Pay), ensuring that women don’t miss out on any tax advantages.
Using salary sacrifice arrangements, as well as other wider policy changes, such as continuing employer contributions during maternity leave or making contributions on earnings below the auto-enrolment threshold, which often excludes part-time workers, could make a huge difference over time.
Continuing pension contributions during maternity leave can also make a significant difference to the size of women’s pensions pots over the long term.
Offer inclusive guidance and support
Employers can help by making financial guidance and advice available in ways that suit flexible or remote working patterns and ensuring that any communications around support for financial planning are inclusive by design. That could mean making sure pictures represent women as well as men and that examples or case studies reflect women’s as well as men’s financial priorities.
This could also mean support with guidance, education and advice that addresses the generic differences between women’s attitudes to risk and men’s – although everyone is an individual.
Support savings other than pensionsProviding easy access to products such as ISAs, or implementing payroll savings, can help everyone get into a tax-efficient savings habit, even if they don’t have time to research products, or have little confidence in getting started. ISAs can also be a great option for building a financial safety net for the future.
Talk to employees
The most effective way to understand the financial challenges women are facing is to ask them. Employers can then build a more accurate picture of their financial aspirations and the challenges they face in achieving them.
That information is vital to any financial wellbeing strategy that helps women look after their money and thrive financially in the future.