Why women need a different financial playbook

Men and women have the same financial needs – they need to pay their bills, save for their future and to build financial resilience. However, women may face more barriers in achieving those aims. They tend to live longer, which means their money needs to go further, they are more likely to have career breaks, and perhaps most importantly, they lack confidence to take sufficient risks. None of these challenges are insurmountable, given the right financial education.

It is an uncomfortable truth that, as it stands, women have less financial resilience than men. There is a notable gender pension gap, for example. A 2024 report from Now Pensions found that by their late 50s, women have average pension savings worth less than two-thirds of men's. This group found that the gap derives mainly from inequalities in the labour market, including differing working patterns and the gender pay gap.

This is a problem because women live around four years longer than men. They already need a larger pot to maintain their standard of living in retirement. However, they also tend to earn less over their working career. Office for National Statistics’ data suggests the average lifetime earnings for women is around £380,000, compared to £643,000 for men. This means women have to do more, with less.

One solution to this might be to take more investment risk, but women tend to do the opposite. While no-one is suggesting they redeploy their savings into crypto assets, women own 30-40% less in stock market investments and private pensions than men. This means that even when they do save, their savings don’t grow as fast, and they don’t have the same inflation protection. A 2024 survey found only 17% hold a stocks and shares ISA versus 30% of men.

Women also tend to shoulder a disproportionate share of caring responsibilities. While this is changing over time, it is still more common for women to take time off to care for children or elderly relatives. This can have a deleterious effect on long-term financial planning. Women miss out on contributions, and then they miss out on the compounding effect of those contributions. Perhaps they lose £60,000 in contributions by taking time out to care for children. By the time they reach retirement 30 years later, that loss is equivalent to a dent in their pension pot of £270,000 (assuming a growth rate of 5%). In other words, it is a permanent impairment to their long-term financial resilience.
 

A different approach

This isn’t as gloomy as it sounds. It simply requires a different approach. The financial industry has historically not necessarily been good at addressing the needs of female investors. Too often, it assumes a linear career and a set retirement date, rather than accommodating career breaks or variability in earnings. For example, for women, the impact of early pension savings becomes particularly important.

The different needs of female investors can be explained through two hypothetical investors. The first, Alice, puts £300 a month in a diversified stocks and shares ISA from the age of 18 and maintains that commitment for the next 20 years. When she is 38, her investment would be worth £138,000, based on an unambitious annual return of 6%. If she were to make no further contributions, and her investments grew at 6% each year, she’d have a pot of £694,000 by 65 – more than enough to fund a decent retirement. Belinda doesn’t start investing until she is 38. Even if she invests the same £300 a month and achieves a 6% return, she can’t catch up. At 65, her portfolio is worth just £242,000.
 

The second point is to maintain pension contributions during periods of low or no earnings. In the UK, people with no earnings can still contribute up to £3,600 to their pensions each year - £2,880 themselves and £720 as a top-up from HMRC.

The Great Wealth Transfer – an unprecedented opportunity for women

There is another good reason for women to increase their financial know-how – and this time, it’s good news. The ‘Great Wealth Transfer’ from baby boomers is set to change the balance of wealth distribution. In a 2020 report, the consulting firm McKinsey & Company estimated by 2030, women could control two-thirds of American household wealth, doubling in a decade. In Europe, the consultancy reports that assets controlled by women have already grown from $4.6 trillion in 2018 to $6.6 trillion in 2023 and could reach $11.4 trillion by 2030. In the UK, women are set to own 60% of the UK’s wealth by the end of this year. This may solve many of the problems listed above, but wealth needs to be managed properly to provide the financial resilience it promises.

Women often start at a disadvantage on financial planning and need to ensure their money is working as hard as possible. That means starting early, and taking enough risk. This can be uncomfortable, but financial education looks at how to take risk smartly and efficiently can provide real confidence.

Women and wealth: Purpose, Power, and Progress 

Watch our recent breakfast conference on-demand, where our CEO Kim Jenson, journalist Joanna Gosling, entrepreneur Emma Sinclair MBE, and Deputy High Court Judge Amanda Hardy KC, sat down to explore the financial experiences of female leaders, founders, and entrepreneurs.