Women rise to the wealth challenge in 2021

Research shows women have borne the brunt of the Covid-19 lockdown and their income, financial health and personal time has been reduced over the past 12 months. We look at how employers can rise to the challenge and help women take control of their own financial health and future in 2021.

Woman-running-fast-to-successfully-reach-the-top-stock-photo

Marianne Curphey

9 March 2021

A revolution in thinking

Women have been most affected by the coronavirus pandemic, feeling the greatest impact in terms of job insecurity, reduction in income and juggling work life with home schooling. Prime Minister Boris Johnson acknowledged the pressure working mothers faced as he welcomed the return to school for children this week on International Women’s Day, March 8.“We all know that the burden has disproportionately fallen on women often holding down jobs and providing childcare at the same time,” he said.Covid-19 has changed our outlook on life – on the way we work, the division of labour and gender roles, questions over pay and conditions and the blurring of boundaries between work and family life. It has prompted searching questions over how and why we work, which may precipitate changes for the better and be a catalyst for employers to introduce more flexible working arrangements for all employees.There have been some positive financial outcomes in terms of a greater awareness of climate change and a strong trend towards savers and investors wanting to support Environmentally Sustainable investments. However, the financial services industry still designs pension products primarily for men who have an uninterrupted career path. Yet the stakes are higher for women if they get their investment and pension planning wrong.Women have proportionally lower lifetime incomes than men, live longer, and do not fund their pension to the same extent as men. There are concerns that the damage done to women’s financial health in the pandemic will be felt for many years, perhaps decades to come. For those women who work abroad, the stakes are even higher. Missing out on five to ten years of pension contributions at the peak of your career because of complications in the tax environment where you are employed can wipe tens of thousands of pounds off the value of your pension when you retire.

Watch the video replays

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Sleepwalking into pension poverty

This week the OECD released its report on retirement savings outcomes for women. The key finding is that on average in the OECD, combining public and private sources, women aged 65 and older receive 26% less income than men from the pension system.“The news from the OECD that women aged 65 and older receive more than a quarter less income from the pension system shows there is still a lot of work to do to close the gender pension gap,” says Jeanette Makings, Head of Financial Education at Close Brothers, the merchant bank.“Whilst this has been an entrenched issue for decades, the disparity between men and women in terms of their financial resilience and savings has become even more paramount in light of the Covid-19 crisis,” she says.Indeed, PwC has estimated that by the end of 2021 women’s financial progress could be back at 2017 levels due to the pandemic, with women significantly more vulnerable to the economic impact than men. Over the last 12 months, women have also experienced higher job losses and taken on a disproportionate burden of unpaid care.“This latest research gives the Government, employers and providers both insight and a call to action to ensure that women’s financial health is specifically supported,” Jeanette Makings says. “Employers are in a great position to facilitate this by making sure their female employees are offered guidance and advice about their financial health including their retirement savings plans, the impact of career breaks and reduced hours when raising a family.”Amanda Latham, Policy & Strategy Lead at Barnett Waddingham, a leading independent UK professional services consultancy across risk, pensions, investment and insurance, warned that this year has reinforced the fact that progress can move backwards as well as forwards.“As we start to ‘build back better’, women’s financial futures must be a core part of our agenda,” she said. “The OECD’s findings are clear; biases in the private pension system have created a stark disparity in wealth between men and women at retirement. It is far too easy to put the burden on women to contribute more – it’s vital that the government and industry work to create a more robust and inclusive pensions framework, offering fairer solutions to all.”

For employers, that means addressing the gender pay gap, setting higher default contribution levels for auto-enrolment, improving pay and benefits during and after career breaks, and introducing more targeted financial education.“At a policy level, we must consider whether the auto-enrolment rules are fit for purpose, review the state pension provision and introduce more beneficial policies for those taking time out from the workplace to look after children and the elderly,” she says.All of this analysis should also consider intersectional identities – people who are gender non-conforming, people of colour, and people with disabilities are all likely to have differing financial needs. A ‘one size fits all’ policy will simply fail all – we must choose to challenge the system and improve it for everyone.

Different experiences of lockdown

During the first lockdown in the UK, more men were furloughed than women, and did more unpaid work at home. However, men were quicker to return to the workplace and some male-dominated industries returned quicker, while female-dominated industries like hospitality faced more restrictions. Women have reported higher anxiety, depression and loneliness than men as lockdown persisted.“Women who have faced a financial penalty by taking a career break in the early years as parents will now have that penalty exacerbated by taking another year out of the workplace,” says Sarah Coles, personal finance analyst, at financial company Hargreaves Lansdown.“It means when more caring responsibilities come up later in life - like looking after parents or grandchildren - they could be earning even less than their partner, so they might be in the frame for this too.”She says women need to take stock and examine their finances now. If they have taken the brunt of the career hit during the pandemic, they need to understand how that will affect them over the long term, what it will do to their long-term planning for pensions and how they can close the gap.“Otherwise, there’s a risk that the gender gap that has opened up during the pandemic hurts women financially for the rest of their lives,” she says.

The need for workplace reform

Gen X women (those born between 1965 and 1980) are facing particular challenges to save for retirement, and many are not prepared for when then stop work. Nearly one in three are at significant risk of having inadequate incomes in later life and one in six have no pension savings at all, according to new research from the International Longevity Centre (ILC) and Phoenix Group.ILC and Phoenix Group are calling for policymakers to support Gen X women to save more for retirement by:

Requiring employers to make all job arrangements flexible by default so that female employees can alter their working patterns throughout their lives.
Carers’ leave should be paid for at least 5 days; it would also be beneficial to increase the paid leave entitlement (over time) to 10 days, alongside a longer period of unpaid leave of up to six months.

However, a focus on equality alone will not break down established gender biases, says Claire Thomas, Vice President, Head of EMEA Digital Solutions at Hitachi Vantara.“Whilst I believe everybody should have the same opportunities, we should acknowledge that a lot of young girls and women in the UK and in different parts of the world might face different barriers to achieve the same goals we have and need more support to make these goals a reality,” she says. “Equity is about factoring in these differences and giving everyone what they need to be successful.”She argues for setting firm actionable targets across all levels of the organisation to deliver real change and establish a culture of allyship to speak up for equity and speak out when words do not align with actions.“We have to work closely to develop approaches such as establishing diverse hiring panels to ensure we reduce the chances of bias and open the doors for people from all walks of life,” she says.There are also steps that companies can take to develop financial literacy among staff and support their financial wellbeing in an extension of existing employee wellbeing provision, says the CIPD.Money and debt worries can impact people’s performance at work, with consequences for organisation productivity and the bottom line. Provision for financial wellness programmes, however, is patchy, and the Chartered Institute of Personnel and Development (CIPD) questions whether employers are doing enough to support the financial wellbeing of their employees.Its latest reward management survey finds that half of employers (49%) do not have a financial wellbeing policy in place and many firms do not regard having a financial wellbeing policy as a current priority.“The moral and business case for supporting financial wellbeing is clear and we are encouraging employers to ensure they have a financial wellbeing policy in place to support those in need,” says Charles Cotton, senior performance and reward adviser at the CIPD.“For too long it’s been considered the poor relation to wellbeing but we know the two are intrinsically linked and should have parity. Whilst we fully acknowledge how tough it is for businesses right now, with many just focusing on surviving, we think there’s a strong case for employers to be doing more to support their people’s financial wellbeing. It may well be that even light-touch steps, such as signposting to independent money and debt advice, can start to make a difference.”The CIPD argues that every employee stands to benefit from having better access to financial wellbeing support, particularly at key life stages, such as when they are starting out, becoming a parent or retiring.

What can be done to help women create a secure financial future?

New research from Yolt, the smart money app, found that almost 10 million (9.6m) UK women have experienced a financial shock, such as a pay decrease, job loss or a drastic change in financial situation, since the beginning of the pandemic. Of this group, on average saw their income decrease by £434 per month.Research by Fidelity International has also found that 23% of women have experienced a fall in income over the past year and more than half (51%) have seen their career, mental health or physical wellbeing negatively affected by events in this time, revealing the possible far-reaching implications for women’s financial futures.There is a danger that these challenges could unwind long-term progress on gender equality.Maike Currie, Investment Director at Fidelity International, said this drop in income is having a knock-on effect on women’s ability to save and invest for their futures.“Pre-pandemic, women were increasingly embracing their financial power and this progress must continue,” she said. Increasing your pension contributions is the most sure-fire way to building up your pension pot and it doesn’t have to be by much. The Fidelity Women and Money report found that just by contributing an extra 1% of salary into a pension per month, women can close the gender pension gap by retirement. There is also much the financial services industry can do to make their products and services more family friendly.“Sadly, for a lot of women, the world of finance, continues to be perceived as part of a man’s world with predominantly male language, limiting women’s capability to truly exercise their own financial potential,” says Zoe Bailey, Chartered Financial Planner and Director at Tilney.“Thinking specifically about this year’s International Women’s Day theme “Choose to Challenge”, we must break the cycle of gendered domestic roles, especially in relation to household finances, as this is one way to open up new routes and time for women to expand their financial capabilities, pursue their own investment and saving goals, and ultimately feel more in control.”Research by IW Capital reveals the disparity that still exists in access to finance and investing for women. While over 10.3 million men in the UK are looking to make investments this year, only 6.8 million women are looking to do the same in 2021. Access to investing is an important tool in financial planning and, in a period of record low interest rates, one of the only ways to grow savings.“Access to investment opportunities for women is not only important for helping to create an equal financial footing between men and women, but also in making businesses more aware of the changes that need to be made,” says Luke Davis, CEO and Founder of IW Capital. “Research has shown that women are more likely to back female founded firms than men, further increasing equality of opportunity.”

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