How minding the gender gap can unlock opportunity

Scottish Widows

Women are becoming an ever-increasing force to be reckoned with when it comes to controlling wealth, but there are still some significant barriers that can stop them from investing. We consider what these are, how it plays out for retirement planning, and how to unlock opportunities for advisers and women themselves.

There are a number of factors that are driving the growth in investable wealth controlled by women.

Demographic – women typically live longer than men, so have a greater opportunity to accumulate wealth. Married women often outlive their spouse, so wealthy widows are also an important category of potential investor.
Economic – more women are employed or self-employed, with earnings power increasing as the gender gap reduces.
Social – there are an increasing number of women who are financially autonomous, with more women choosing not to marry and others divorced.
Cultural – growing acceptance of the role of women in financial decision-making.

In fact, according to a recent study by McKinsey, while global financial wealth increased by 43% between 2018 and 2023, the amount controlled by women rose by 51%¹.

Gender differences

Despite this, women are still less active investors than men. Boring Money, for example, found that there are 3.3 million more male investors in the UK than female, and while the average amount invested is £115,000 for men, it’s just £70,000 for women. Among younger people, the gap is more than double, with 41% of males aged 18-34 investing compared to 20% of women².

When it comes to later life, this lack of investing outside of pensions can contribute to lower retirement incomes for women, particularly when combined with lower lifetime earnings. While the overall gender pay gap has been falling since 1997, the median hourly pay for fulltime employees was 7.0% less for women than for men in April 2024³. And women typically earn less over their lifetime than men. The combination of lower levels of investing overall and lower pension savings can be bad news.

Retirement challenges

What does this mean for women in retirement? Our National Retirement Forecast found a projected 30% gender gap in overall retirement income, with women in defined contribution schemes on track to have a £130k smaller pension pot at retirement than men on average.

Women expecting other long-term savings in retirement meanwhile, are on track to have £39k less than men on average. That translates to some 42% of women facing poverty in retirement compared to 35% of men.

Women in defined contribution schemes are on track to have a £130k smaller pension pot at retirement than men on average.

What needs to change?

To encourage women to invest, advisers and investment managers need to understand why they don’t already, as well as what could motivate them to change that, and what’s important to them when it comes to making investment decisions.

Much has been made of women being more risk averse, which has long been touted as one of the biggest barriers to them investing. But this is a blanket attitude, which doesn’t take account of the nuances within the statement. In fact, Fidelity’s 2024 Women and Investing study found that 7 in 10 women do in fact invest in stocks⁴.

Women are not necessarily risk averse, but they can take a different approach to men and could perhaps be better termed as ‘risk aware’.

Understanding what matters

Women tend to place greater importance on feeling fully informed before taking a decision and keen to consider the long-term consequences of those decisions. This can have implications for the advice they seek and how best the industry communicates with women.

Although women are, of course, interested in the return on their investments, just the same as men, Kantar found that they respond more to communications that focus on how that wealth can make a difference to themselves, their family and, in many cases to wider society. They also tend to prioritise financial wellbeing rather than just the accumulation of wealth.

Value for money is an important consideration for women seeking advice, but relationships are also important in building trust. Showing empathy and understanding and taking the time to discuss options can help. While women don’t necessarily show a preference for a female financial adviser, according to McKinsey, the culture of the firm and how inclusive it is can make a difference.

42% of women face poverty in retirement compared to 35% of men.

Closing the pensions gap

When it comes to pensions, our Women and Retirement Report highlighted a number of ways to close the gender gap in retirement outcomes:

Continued reporting and focus on the gender pay gap
Better support for women returning to work and greater equality in parental leave
The expansion of auto-enrolment to include lower earners and the self-employed
Greater access to advice and guidance
Legislation to include pensions in divorce proceedings
Individualised as well as family pension planning
Overhaul access to the state pension.

Good progress has been made in reducing the gender pay gap and the gender gap in retirement outcomes, but there’s still work to be done, particularly in engaging younger women in investing. The role of financial education, using social media channels and influencers to reach women, and making investing more of a mainstream activity will be increasingly important.

Then, once those barriers to investing have been overcome, designing solutions and guidance that really speaks to women will be vital if the industry is to unlock the potential of women’s wealth and create better outcomes for both individuals and society.