The £1.65 Trillion Gender Investment Gap

The stats speak for themselves - women are systemically poorer than men

Maria Collinge
March 15, 2024
Where the problem starts to kick in is when we include the word investing. They are much less likely to have an investment account, or to be saving money into their pensions (Photo: Bruno Figueiredo/Unsplash)
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Women are paid less, they have less saved, they have smaller pensions and they have smaller investment accounts. This leaves the gender savings gap in the UK at a whopping £1.65 trillion problem. This is a problem and talking about it matters.

So, why does it exist you ask? Figures suggest that it’s not a lack of willingness. Women are just as likely to have a savings account as men, with 65% of women having a cash account compared to the exact same 65% of men. Where the problem starts to kick in is when we include the word investing. They are much less likely to have an investment account, or to be saving money into their pensions. Again, you might wonder, why this gender pension and investment gap exists. Let’s start to break it down. 

A problem of monthly savings

Firstly, one of the biggest differences isn’t whether they’ve opened an account, rather it’s how much women have saved. This starts with the raw data on how much is saved per month. Women have less than half the amount saved than men. On average women save £180 a month, while men put away a far higher £306 a month. That difference will quickly add up – even over a year that’s £1,512 more the average man is saving. Once you extend that over a longer period and include interest, even just at 1%, you end up with almost £16,000 extra in the man’s account after 10 years or more than £33,000 over 20 years.

It’s not due to a lack of discipline though. Figures suggest that in the UK, the gender pay gap is anything between 5% and 9%. This allows for a lot of discrepancies and misreporting. If women are earning less, it figures that they’re also saving less, because they simply have less. It’s worth throwing into the mix that the so-called pink taxes hit women harder. It’s not just the cost of buying costly sanitary protection, and other necessary female products, it’s also the price that’s added on top. Surveys in the US showed that women’s personal care items were nearly 13% more than the equivalent male products. This eats into women’s spare change, that they can’t then choose to save. 

A third of women think they aren’t saving enough for their future, compared to a quarter of men (Photo: Nick Fancher/Unsplash)

A problem of total wealth

This gap clearly translates to women and mens' total assets. When we look at a person's total savings and investments, which is taking into account their cash savings, pensions, investment accounts and any other assets (but not their house), the average woman has £49,000. This seems like a decent amount until we look at mens' average total: £114,000. That’s a £65,000 difference, which when you extrapolate it across the UK amounts to £1.65 trillion. Even if we strip out the cash part of that and just look at pensions and investments, it’s still a £50,000 gender gap – or £1.26 trillion across the UK. 

Pensions are a chunky part of that, for most of us it is the biggest asset that we will ever have. Believe it or not, women start their careers with 16% less in their pensions, and end their careers with nearly half as much in their pensions as men. There may be a logical explanation as to why men are much more likely to have big pensions, which is partly due to having higher earnings across their careers as well as less supposed breaks from earnings than the average woman who may take time out for maternity leave and childcare duties. In the end this leaves the average man with almost £55,000 in their pension, compared to £19,000 for women – a £36,000 gap.

Women know there's a problem

A third of women think they aren’t saving enough for their future, compared to a quarter of men. And while a fifth of men are so confident about their investing levels that they think they are saving more than they need for the future, less than one in ten women feel the same. As a result, only just over a third of women (37%) are confident that their long-term investments will meet their goals, compared to over half of men (55%). 

This is particularly relevant when we think about the goal of retirement, one of the key investment achievements out there. It’s been found that 62% of women aren’t saving for retirement at the moment, and only a quarter of women think they are on track to have what they need to live on in retirement. When we compare this with  men, half of them think that they have what they need. It’s not all in confidence or blind faith either, the figures concur.

There are significant discrepancies between men and women financially - that's a fact.

Unsurprisingly, considering what we’ve seen so far, 44% of women would say that their partner has a bigger pension than them. A fifth of women have a retirement plan in place: it’s to live on their partner’s pension. This might not be so wise, however, when we consider that 76% of women who pass away over the age of 60 are either single, widowed or divorced. Given that women live longer than men statistically, it’s not so surprising. It does leave the argument flimsy however that their male partners' pension will be able to sustain them. 

Why are women so much less likely to invest?

The number one reason women aren’t saving more is due to a sheer lack of money – 57% of women said they don’t have enough spare money each month to save or invest it. When we consider that women often foot the bill for childcare and other family costs, while also having a lower income, it’s not surprising that they feel stretched already.

Onto reason number two. Women are also more likely to have taken a career break. Men do take career breaks too, however they tend to use career breaks for travelling, to study or to recover from ill-health, meaning they are shorter. Women on the other hand take career breaks to start a family and therefore have longer periods of time off work. Two fifths of women say that their career break negatively impacted their long-term financial prospects, compared to a quarter of men.

Women prefer to keep money as cash

Now we're getting to the crux. Reason number three shows it’s not just a lack of money. Even if women were handed a sudden lump of money, most wouldn’t choose to invest it. Stats show that a fifth of women who were handed a surprise lump sum of money would invest it, compared to nearly a third of men. What would they do with this cash? The majority would use it to pay off debt,  pay down their mortgage or would simply keep it in cash.

More women investing can help close the financial gender gap. It's that simple (Photo: Claudio Scwarz/Unsplash)

This tendency to keep money in cash or pay off debt before investing is one of the big reasons for the wealth gap between the sexes. It is seen to stem from a lack of understanding on how to invest. Consider this: 20% of women say they don’t understand anything about investing and 15% say they don’t even know where to start.  

This lack of knowledge most probably stems from the lack of understanding the investment lingo and never-ending acronyms. When questioned about their understanding of key investment terms or types of investments, women are less confident than men in explaining them. This isn’t just the case for those who choose not to invest – 57% of women say they don’t know what type of investments they actually own (compared to a lower but still shocking 38% for men). 

Women can't afford to lose money

But if there’s one data point that sums up the gender divide in investing it’s this: 71% of women would rather not take risks with the clear sacrifice of less rewards in future. With investing there’s always an element of risk. It’s easy to point the finger and simply accuse women of being more risk averse, resulting in them having less wealth. However when we consider the figures on their lower savings, less earnings and reduced disposable income, it may become a little clearer to see why women are shying away from the risk of losing money - they simply can’t afford it. 

And men take more risk

Men are willing to take more risk.  Data shows that 28% of men would rather take bigger risks for bigger potential rewards, compared to just 10% of women. Women surveyed have said that they’re willing to accept the lower figure of 3.9% loss per year in the pursuit of longer-term returns, whilst men are comfortable with 6.6% loss. Almost half of women said they wouldn’t be comfortable with any losses whatsoever. This means that they will pick so-called ‘safer’ assets, like cash savings, that will lead to lower returns and be eroded in real terms by inflation.

The bottom line

The fact that there is a £1.65 trillion gender investment gap is horrifying, shocking, alarming, choose your word and we could keep going. There are plenty of reasons for it, including saving less, earning less, enjoying less disposable income and averting risk when it comes to investing due to lower levels of knowledge and understanding. It needs to change. Women live longer than men, and they have nearly half the amount in their pensions. 

What can we do? We can educate ourselves. Get savvy with investing language. Start to understand what risk actually means, and the potential it might present. Talk to your girlfriends, your colleagues, your sisters, your aunts, your mothers. Spread the learnings you’ve got and boost other women’s knowledge and confidence that they too can invest. Together is always stronger, so go, start spreading these figures and start learning. Female Invest is here here to help. 

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