A Girl's Best Friend

3rd May 2019

Finance expert Naomi Greatorex

Are you guilty of procrastinating over your pension and being not-so-savvy with your savings? Despite living longer and having better educational opportunities than ever, women are still far more reluctant to take control of their finances than men.
Lisa Botwright asks why – and unearths some expert advice along the way…

When’s the last time you had a chat with your friends about money? I don’t mean an animated conversation about the bargain dress you found on the sale rail rack in Selfridges, but an in-depth, honest discussion about savings and pensions. The truth is that many women feel uncomfortable about talking, or even thinking, about money (it doesn’t really go with a glass of Pinot Grigio, does it?) – but in shying away from the topic we are putting ourselves in a seriously vulnerable financial position.

The gender pay gap, for a start, makes for shocking reading. Women earn on average 80% less than men over the course of their working lives; by the age of 65 the pension pot of the average man is five times greater than that of the average woman. And this isn’t just because we’re taking time off to have children – the difference kicks in as soon as we leave education. A London School of Economics study found that within three years of their alumni starting work (and so mostly before having children) female graduates were earning 12% less than their male counterparts.

Not only do women tend to gravitate towards less lucrative careers and accept lower starting salaries, it seems that we’re also notoriously uncomfortable with asking for pay increases, which has long-term implications. As financial journalist Merryn Somerset Webb (Editor-in-chief of UK personal finance magazine MoneyWeek) points out in her brilliant, easy-to-read Love is Not Enough: The Smart Women’s Guide to Making Money, if a woman accepts a starting salary of £25,000 while her male colleague negotiates up to £28,000 and they each then get a 5% annual pay increase, after thirty years he will have earned £285,000 more – and that’s without him negotiating for additional rises at each pay review.

Of course, the disparity worsens if we do have children. Many mothers find it makes sense to work part-time (in an unscientific survey of myself and six friends, only one of us went back to work full time after having babies) – but we’re immediately disadvantaged if we do: part-time workers earn a third less per hour than their full time colleagues. It’s also problematic if we take a career break and then try to re-enter the workplace when our children start school. If we wait until our second child reaches school-age, for example, then we could be out of action, employment-wise, for five to ten years. In our fast-paced world, this puts us on the back foot.

And woe betide us if we expect Prince Charming to rescue us (45% of women say they prioritise healthy bank balance when looking for a partner, while only 22% of men say the same): nearly half of all marriages end in divorce, a fact that’s not exactly ideal for men, but utterly disastrous for women. Four out of every ten divorced women over 65 are so strapped for cash that they quality for income support.

When the Chartered Insurance Institute instigated a report into the social and financial factors affecting women today, it made for bleak reading. Their research confirmed the existence of a substantial protection gap for women, and identified that women and girls experience specific and distinct risks, leaving them significantly exposed (when compared with men) throughout their lives. The CII launched an initiative intended as a ‘call to action to address the overwhelming shortfall in British women’s financial resilience’. Industry expert Naomi Greatorex (MD of Heath Protection Solutions), who has two decades of financial planning experience, explains that she became an ambassador for the resulting project known as ‘Insuring Women’s Futures’ because she found the report so compelling… “I couldn’t just read it and walk away. There’s a clearly a huge problem, and I felt I needed to speak out.”

She recalls that when she first started working in the city she was shocked at the lack of female representation in the workplace. “I remember going to a conference and it was full of loud, boisterous men in pin-striped suits, and I thought ‘how will I ever fit into this world?’” The fact that the finance industry is dominated by men is one reason, she believes, why women feel disengaged from seeking advice. “Women say to me that they ‘feel stupid’ asking questions, or that they ‘don’t understand’, but why would they? It’s okay to ask questions.” In her experience she’s found that while men like written documentation, women much prefer a conversation about financial products and concepts, and tend to be put off by the overly complicated statistics and charts that men favour. “A lot of information is online now, which doesn’t help. We can’t even pop in to a high street bank any more, and chat to an advisor, now there have been so many closures.”

Naomi recognises that the subject can be daunting but cautions against putting our heads in the sand. “There’s so much information out there that it causes anxiety and we ignore it, but really we should break it up into manageable chunks.”

What advice does she have for helping women to take ownership of their finances? She favours following female financial journalists and bloggers, such as Iona Bain youngmoneyblog.co.uk or going along to events such as those run by Molly Benjamin shesonthemoney.com with catchy names such as ‘Girls Just Want to Have Funds’ and ‘Debt Me Out of Here’ to meet like-minded finance-novices. “I love chatting with women at these events over a coffee or a glass of Prosecco. It’s the perfect forum to demystify the jargon,” says Naomi.

On a practical level, she suggests setting some time aside to get to grips with an overview of your money matters. Ask yourself some searching questions. Many women don’t know what employee benefits their workplace offers, for example, and can be caught out if ill-health befalls them. Do you have a plan B that gives you enough to live on if you become seriously unwell, or if you lose your job? Investing in the right insurance needn’t be costly; it’s all about balancing what you can afford with the peace of mind it will bring.

Saving is critical too, although it can be difficult in the current economic climate (the CII report found that it takes a staggering 24 years now to save for a deposit for a house, compared to three years in 1997). “There are some great apps out there like Moneybox, which links to your bank account, rounds up anything you spend to to the nearest pound and then saves the difference,” says Naomi. “Anything is better than nothing.” Disappointed with the lack of money awareness teaching in schools, she feels it’s not only up to us to arm ourselves with the knowledge we need to boost our financial resilience, but also to pass this on to the next generation. “I was so proud of my daughter when she opened her first ISA,” she smiles.

With one third of the population expected to be over 65 by 2050, and with a projected one million more female pensioners than male, our economic future looks uncertain unless we take steps to strengthen it. So if you’re procrastinating over your pension pot, and spending more than you save, it’s time to bolster those bank accounts and figure out your finances.

We can’t afford not to.

Practical Strategies to Help You Take Control

Maximise Your Income:
Are you earning as much as you should? A salary checker like monster.co.uk can you give an overview of the average salaries within your sector. If your earnings are falling short of what they should be, maybe it’s time to ask for that pay rise. Put together an objective list of your achievements and present them clearly to your boss. Remember they’re lucky to have you in their company, not the other way round. If the time’s not right to do so, ensure you’re looking ahead at ways you can improve your earning potential, perhaps by aiming to take on more responsibility or by gaining extra qualifications.

Don’t Waste Money Unnecessarily:
Review your monthly outgoings to see if there are ways you can save money. Run through all your direct debits to see if you really need them. (Be honest, how often do you actually use that expensive gym membership – would it be better to pay-as you-go at the local leisure centre?)
Use online comparison sites to review your mortgage and utility providers. Whenever you consider treating yourself new clothes or shoes, work out how many hours you need to work to pay for them.

Clear Your Debts:
Most of us owe money in one form or another, but if more than 20% of your income (after tax and mortgage/rent) is going on debt repayments, then you may need some specialist advice to untangle your finances. Write out exactly what you owe and how much interest you’re paying. Can you consolidate any of these repayments to make interest savings? Contact stepchange.org or citizensadvice.org.uk for free support.

Be Savvy About Savings:
The ideal goal is to have savings you can instantly access for emergencies, as well as long term investments. Compare interest rates for savings accounts on websites like moneysupermarket.com. The government’s incentive for us to save comes in the form of Individual Savings Accounts (ISAs). For the 2019/20 tax year the ISA allowance is £20,000, which can be split across a Stocks & Shares ISA and Cash ISA or invested in one type only. The annual ISA allowance resets at the start of each financial year, so if you don’t use it you lose it. Depending on the amount you have available to invest, you should seek specialist advice from a broker. Women are notoriously risk-averse, and prefer the safety of traditional bank accounts to investing in the financial markets, but this comes at the expense of lower returns. Be brave: moderate risk can reap rewards. The website savvywoman.co.uk is an excellent source of information for savings, investments and more.

Don’t be Penalised by a Poor Pension:
Are your pension arrangements sufficient? Are you taking advantage of everything your employer is offering? It is now compulsory for employers to automatically enrol eligible workers into a pension scheme, but the yield may not be sufficient for your future needs; it’s always worth checking. And if you have lots of different pensions from different places of work, spend some time reviewing them to ensure they’re working for you. Is it better to put them all together in one pot? It’s easy to view our retirement as something that will happen in a dim, distant and hazy future, but this is a blinkered and foolhardy approach. The state is certainly not going to be paying for us to sip cocktails on Caribbean cruises and so if we want a comfortable future, we need to start paying towards it as early as possible.

Don’t Put Your Head in the Sand:
Money is a complex subject but it’s an essential part of our every day lives. It’s time to prioritise our finances and to set aside a little bit of time each week or month to tackle one thing on our financial to-do list. We mustn’t assume that ‘our other halves’ will take care of our finances, and nor must we fail to engage by saying ‘I’m just not good with money’. Open up that cash conversation, ask your friends questions (general, not ‘how much do you earn?’!), interact with experts online and face-to-face – and take steps to empower yourself.

Find Your Local