There is no doubt that women face a range of specific financial risks stemming from gender related issues. Women are affected by a number of factors – the gender pay gap, the roles they are expected to play in families and society, and how they perceive themselves. Society is changing, with relationships taking different forms, smaller families and delayed parenthood. Women are particularly affected by these changes.
The Chartered Insurance Institute in the UK released a report in 2018 which considers women’s financial risks. At that time, the Institute called on insurance and financial planning professionals to review their approach to providing solutions for women and to work in collaboration with the government, regulators and society “to secure an equal, independent and stable financial future for the next generation’.
The report sets out six “moments that matter” for young women: growing up, studying and requalifying; entering and re-entering the workplace; relationships (making and breaking); motherhood and becoming a carer; later life, planning and entering retirement; ill health, infirmity and dying. Each one of these key life stages presents risks for women.
It is easy for young women to fall behind right from the start with study and career choices. The burden of student debt falls more heavily on women. Factors such as the gender pay gap and career breaks while parenting mean it takes women longer to repay debt. Women are over-represented in lower paid roles such as administrative and secretarial work, caregiving and other service roles and this affects their ability to save. Enhancing the awareness of the risks and rewards of their educational and career choices can help young women get off to a good start.
Increasingly women are delaying marriage and choosing to either co-habit or stay single. The high rate of relationship breakdown is a key risk for women whose earnings and assets are low. Women need encouragement to seek equality at home and in the workplace to reduce this risk. Given the tentative nature of relationships, it is important that women strive to become financially independent. However, financial independence is difficult to achieve for women who work part-time or take career breaks in order to look after children. Greater support for women through motherhood and heightened awareness of the consequences of work choices can help increase their independence and resilience.
Women have a longer life expectancy than men. This means they need a higher level of retirement savings and are more likely to spend time living alone in retirement. Living costs per person are generally higher for those living alone. Relationship breakdowns and lower earnings impact on home ownership for women and the number of women renting a home or paying off a mortgage in retirement is increasing. Increased longevity means women are more likely than men to spend their final days in rest homes or at home with paid carers and these additional costs need to be provided for.
Whereas historically fifty-year-olds focussed on building up their retirement savings, delayed parenthood means they are still taking care of dependent children and perhaps even elderly parents. The gender pay gap means that women save less during their working life for retirement. Research shows that the average balance for women in KiwiSaver is well below the average for men. Various reports estimate the gap at between 15% and 30%. Women need more retirement savings than men but have less, which may mean they work longer. It is vital that women receive information and advice about retirement planning to give them greater choice about when to retire and to help them avoid living in poverty in retirement.
All through life, women can find themselves less able to withstand crises such as health events, redundancy or relationship breakdown as their savings are lower. It is important to raise awareness in women of how to reduce their vulnerability through risk management.
To help drive changes for the benefit of women in the UK, the Chartered Insurance Institute has established the Insuring Women’s Futures Task Force. Let’s hope we see a similar initiative in this country.