The Gender Pay Gap: Achieving Financial Empowerment
International Women’s Day (8 March) is an important reminder of issues faced by women across the world. Finance remains a key area where women experience considerable barriers. There are still significant gender “gaps” between men and women regarding pensions, income, investing and more. Fortunately, there are options for women to respond to these societal pressures and put themselves in better financial positions.
Here at Castlegate, our team highlights three key areas where women face unique financial planning challenges. We also include our thoughts on how these can be addressed in 2025. We hope these insights are informative and inspiring for you.
The Earning Gap
The UK has made progress in closing the gender pay gap. In 2023, the gulf stood at 14.4%. A year later, it stood at 14.3%. Still, these figures hide some difficult realities, like the distinct widening of the gap for women aged 40 and over.
There are variations in the gap according to region, industry and company size. By region, the pay gap is smallest in Northern Ireland and largest in the South East.
There are various potential reasons account for the ongoing gender pay gap:
Caring responsibilities. Women are up to seven times more likely to take time out of work to care for dependants, spending an average of 10 years caring for children.
Part-time work. Women are more likely to work part-time, leading to lower earning potential and lower overall values of pension contributions.
At the national level, work still needs to be done to address these issues. However, individual women in the UK can empower their own finances in several ways:
- Negotiate salaries confidently and research fair pay for your role.
- Explore “passive income” sources or side-business ideas to supplement earnings.
- Leverage employer benefits like salary sacrifice schemes and flexible working to maintain earnings.
The Pension Gap
For many women, one of the knock-on effects of lower earnings is lower pension contributions. Naturally, less income makes it harder to build wealth and save towards retirement.
On average, men have twice as much in pension assets compared to women. In practical terms, this can translate into a difference of £5,700 less pension income per year in retirement. The specific size of the gap is disputed somewhat, with data from 2018 to 2020 showing a 35% gender pension gap. Either way, the gap is there, and it is significant.
Over two-thirds of those experiencing pension poverty are women. Moreover, women tend to live longer than men, with more time spent in ill health. This means the lower pension income needs to be stretched over longer periods and cover more medical-related expenses.
Here are some ways for individual women to start closing the pension gender gap:
- Start saving for retirement as early as possible to benefit from compound interest.
- If you are in a committed relationship, consider building up your own pension savings rather than just relying on those of your significant other.
- Maximise your State Pension and make sure you are not missing out – e.g., check your eligibility for credits if you have spent time caring for children, and, if you can, claim them.
The Investment Gap
There are only 6.4 million female investors in the UK. This is 3.3 million under the number for male investors, who hold £599 billion more in ISAs. This is greater than Switzerland’s GDP.
Pensions make up much of this “investment gap”, but women are also half as likely to invest in a General Investment Account (GIA). Within GIAs, balances are generally lower for women, who also tend to be less engaged with their investments.
Women (31%) feel less confident about managing finances than men (44%) despite this insecurity having no factual basis. Statistically speaking, women tend to be more “risk aware” than men, making them more likely to consider the long-term picture and follow best practices (e.g. diversification).
To close the investing gender gap, individual women should consider the following:
- Building confidence in investing by expanding your financial knowledge.
- Starting small and investing regularly. Over time, even this can lead to long-term growth.
- Challenging societal norms where necessary and prioritising financial independence.
- Exploring how your employer could help bridge the gender gap in pensions, investment education and flexible savings options.
Invitation
If you’d like to make sure you’re taking the right steps to safeguard your financial future, please get in touch.
Please note:
Your capital is at risk. Investments can go down as well as up. Past performance is not indicative of future results. Tax treatment depends on individual circumstances and may change. This content is for information only and not investment advice. Any decision to invest is the reader’s own. Diversification is key to managing risk. Market volatility affects investment values. Inflation erodes savings. Liquidity risks may prevent quick access to funds.
