Female? Here's why you'll be on the financial back foot forever

The gender pay gap is just the tip of the iceberg. We investigate the legislation and Government policies that have ensured women's finances will always trail those of men

The pay gap is just the beginning of gender-based financial inequalities (andresr)

It’s hardly a secret that UK women are at a financial disadvantage to men; the well documented 13.9 per cent gender pay gap means that women have been effectively working for free since 10 November.

However, scratch the surface of women’s finances and it’s easy to see that many women are more financially insecure than their male counterparts – and that this insecurity runs far deeper than annual salary.

Until more is done to address the many financial disadvantages that disproportionately affect women then they will remain at greater risk of poverty, financial insecurity, insufficient pension savings and curtailed independence.

The motherhood penalty

Women are uniquely vulnerable to pregnancy discrimination, with 11 per cent saying they had to leave a job through redundancy, mistreatment or dismissal following a pregnancy. A further 20 per cent told the Equality and Human Rights Commission that they had been passed over for promotion, for a pay rise or even had their salaries reduced as a direct result of their pregnancy.

Earlier this year a report from PwC into female professionals revealed that women returning to the workforce after a career break lose out on an average of £4,000 each a year by entering lower-skilled roles.

However, while pregnancy discrimination can be tackled, there is a more insidious financial penalty at play once women have families – and this can affect their financial security for decades.

Research carried out by Eurostat, the European Union’s official statistics organisation, shows that women are more likely to work part-time than men in pretty much every EU member state. The more children a woman has, the more likely she is to work part-time, while for men the opposite is true.

That may work well around a young family but it can leave women exposed for the rest of their lives. Research carried out by Scottish Widows reveals that 16 per cent of UK women are working part-time but pensions auto-enrolment is only triggered when an employee earns £10,000 or more a year, meaning many women risk missing out.

What’s more, twice as many women as men work in at least two jobs. This could mean that more women fail to qualify for automatic enrolment into a pension because they earn less than the threshold for each job.

Scottish Widows retirement spokesperson Jackie Leiper said: “It is vital that we focus not just on encouraging women to reach their potential in their careers, but also on ensuring they are reaching their full potential when it comes to saving for retirement.”

One in seven pensioners in the UK lives in poverty, according to Age UK, and women are more likely to be living in poverty than men. More women are saving adequately for their old age than ever before but they have still not caught up with men and the pension savings pay gap between men and women is growing. Scottish Widows’ research reveals that 52 per cent of women are saving adequately for their retirement, compared to 60 per cent of men.

The protection penalty

Women are also more likely to find themselves exposed when it comes to protection. New research carried out by Aegon shows that more than half of women in the UK have no insurance in case of their death or critical illness, despite 28 per cent worrying about what would happen to their family if they became too ill to work or if they died.

The survey, carried out among more than 2,000 women, showed that cost was seen as the main barrier to women better protecting themselves and their families, with almost half saying it was too expensive, despite some policies costing as little as £7.01 a month.

Stephen Crosbie, protection director at Aegon, says: “Many women cite cost as the reason for not buying protection, but £7.01 a month is a relatively low price to pay for peace of mind. There’s a clear opportunity here for the industry and advisers alike to raise awareness among women about the value protection can provide.

“Across the UK people insure their homes, their pets and their mobiles but overlook the vital component that funds all of their day-to-day spending – them. Instead, women expect to rely on savings but the sums often don’t add up with relatively few people having substantial cash savings to fall back on.”

Childcare penalty

Women’s finances are not just stretched by the pay gap but also by the high cost of childcare, which often disproportionately affects their earning potential. A family with one child under two in part-time childcare and one child aged five using an after-school club can expect to pay £7,933 a year for their childcare, according to the Family and Childcare Trust.

That rivals the cost of many mortgages and is just for part-time care. While shared parental leave has encouraged more men to take on childcare, women still do the bulk and it is their careers that suffer if nursery fees are unaffordable.

The Young Women’s Trust has just published analysis that shows almost 300,000 young women in the UK are “shut out” of the job market, despite 86 per cent wanting a job. The charity said that caring for family members is the main reason women give for being economically inactive and that mothers are particularly affected by the unaffordable cost of childcare.

Dr Carole Easton, chief executive of the Young Women’s Trust, said: “While the Government focuses on reducing its unemployment figures, hundreds of thousands of women who are not included in the numbers are being forgotten.

“Giving young women the support they need to find work will not only help them to become financially independent but will benefit businesses and the economy too.”

The Government is taking steps it hopes will further reduce the gender pay gap and is in the process of legislating to require all organisations employing 250 or more people to measure and report on their specific pay disparities.

However, the issue of women’s finances is more nuanced and complicated than one single figure. Addressing that and ensuring they are not left at greater risk of poverty is likely to take a Government-wide approach.

Frustratingly, however, it seems that women have actually been bearing the brunt of recent Government policy and cuts. Just this month a coalition of women’s groups and think-tanks spoke out against what they described as “unfair and discriminatory” policies, reporting that 81 per cent of welfare cuts made since 2010 have come from women. Meanwhile, the top 1 per cent of earners – of whom 85 per cent are men – have received £3bn in tax cuts over the same period.