It's different for women

Nic Cicutti discovers why financial security usually costs them more

Take two adults - one male, one female. They are the same age, have the same jobs and identical lifestyles. Their financial planning needs are the same, aren't they?

In fact, the opposite is true. Women find themselves paying more, or less, than men across a wide range of finance products.

In effect, the same potential outcomes - financial security when ill, a decent retirement income, even car insurance - require different inputs from women.

These differentials are set to continue, despite changes in the law, such as this week's planned government reforms entitling divorced people, usually women, to a share in their partners' pensions when a marriage ends.

Take permanent health insurance, an income payable when a person is unable to return to work after a lengthy illness. Holden Meehan, a firm of independent financial advisers in London, says cover worth pounds 20,000 a year for a woman aged 30, in a low-risk occupation, would cost pounds 33.76 a month. By contrast, a male of the same age would pay only pounds 18.60 a month. At age 35, women pay pounds 42.18, compared to just pounds 22.98 for men.

Amanda Davidson, a partner at Holden Meehan, explains women's higher claims experience: "It is tough being a woman. I suspect the pressures of modern living, where a woman has so many roles to play, mean more stress on body and soul, and hence more claims. Women are also more complicated physically than men, so there is more to go wrong."

The differential is reversed in the case of critical illness cover, a different type of insurance where a lump sum is paid out when sudden illnesses strike, such as heart attacks and strokes or cancer being diagnosed. John Joseph, a London financial adviser specialising in this field, says cover of pounds 100,000 for a woman aged 45 might cost pounds 42.60 a month. However a man might expect to pay pounds 55.70.

This variation increases with age: women aged 55 pay pounds 95.50 a month compared with pounds 128.40 for men. By contrast, at age 30, the differential favours men, if anything: pounds 14.20 compared to pounds 15.70 for women.

Mr Joseph says: "Typically, with this type of contract women have had higher rates of cancer than men but they did not appear to suffer from coronary or respiratory diseases, which meant they paid less.

"But this is changing as underwriters obtain more up-to-date claims experience and it is likely that women will have to pay more."

Private medical insurance is an exception - for now. Bupa, the largest provider, does not differentiate between men and women but on the basis of age. A person of either sex aged 30 would expect to pay pounds 23.68 a month for Bupa's more basic type of cover. But John Castagna, Bupa head of product development, warns the company is reviewing this policy following competition from providers which charge gender-based premiums.

With life insurance, the straightforward type of cover which pays out in the event of death, the picture is the same. Prudential, the giant UK insurer, would charge a 30-year-old woman pounds 19 a month for cover worth pounds 100,000. A man would pay pounds 21. Ten years later, however, the man would pay pounds 42, with the woman charged just pounds 28 a month.

Norman Turner, head of financial planning at Prudential, says: "Although mortality rates have improved for men and women, the differential in terms of how much longer women live has tended to remain the same."

Women's longevity relative to men also has a big effect on their retirement income. But here, social factors also play an important role. The fact that women live longer means that when they retire, their pension is less than a male's at the same age. Figures from the Annuity Bureau, the retirement income specialist in London, show that a male smoker aged 60 would expect to receive an income worth pounds 7,936 for a pounds 75,000 lump sum. A female smoker would receive only pounds 7,060.

Peter Quinton, who runs the Annuity Bureau, says: "In general, companies will pay a similar amount to men and women. Because women live longer, they receive less but over a longer period."

This longevity means that for women to receive the same pension as men, they must pay in more. According to Black Horse Financial Services, part of Lloyds Bank, a woman aged 35 would expect to pay about pounds 180 a month to receive a pension worth pounds 10,000 at 65. By contrast, a man would pay pounds 160.

Clearly advance planning is critical in this area. Yet research by Fleming, the fund manager, shows 53 per cent of women will face a sharp drop in income when they retire, against 40 per cent of men. An important contributor to poor pensions is not just lower pay, but career breaks. A woman who takes five years off might receive a pension worth at least 15 per cent less than someone who remains in work.

Women also have to pay out more when it comes to meeting the cost of long-term care (LTC). Sandy Johnstone, who heads a unit specialising in LTC products for Commercial Union, says a woman aged 65 would expect to pay pounds 67.60 a month to insure for cover worth pounds 10,000 a year. A man pays pounds 52.80.

Roddy Kohn, a financial adviser at Kohn Cougar, a Bristol firm, says: "The bottom line is that women must begin planning earlier and in more detail than men. The good news is that if they do, they can offset many of the financial handicaps they are likely to face."

Relief may come in the form of lower car insurance premiums. Premium Search, a telephone insurer, says a 30-year old London teacher driving a Vauxhall Cavalier would only pay pounds 293 in premiums, compared to pounds 302 for her male opposite number. The company says men tend to have fewer accidents than women but the cost of their claims tends to be higher.