“If women are less likely to invest, they could face further disadvantages in the long term,” says NatWest. “They may find it harder to be financially independent and could be more likely to face financial difficulty in old age because their pension savings are lower than men’s.”
Finance Monthly speaks to Camilla Stowell, Head of Client Coverage for Coutts, part of the NatWest Group, about the reasons behind the gender investment gap, the benefits women are missing out on, and how NatWest Group is helping to close the gap.
There are undoubtedly many factors at play but, ultimately, why are women less likely to invest?
The wealth industry has not normalised investing for women, who are more likely to talk about money with friends and family instead of financial institutions.
Findings from The Wisdom Council (March 2021) show that women now earn the same or more than their male partner in almost 30% of households in the UK, yet men are 10% more likely to hold an investment product than women in the UK according to the OECD. Boring Money also finds that only 13% of British women have a stocks and shares ISA.
These findings show that the investment gap goes beyond financial issues, and is inherently tied to women’s choice, freedom and security. That’s why it’s more important than ever to address the gender savings, advice and wealth gap, with financial institutions taking responsibility to engage with women in a way that is relevant to them.
What benefits are women missing out on by not investing?
The main benefits women are missing out are financial. Women continue to live longer than men, and yet have pensions provisions that are less than half of those of men on average.
It’s also about financial confidence. Life events such as divorce and bereavement are stressful enough without having to worry about money, which can add to the stress. On average, 51% of the financial advice sought in the UK by women was post-divorce.
Women are also missing out on the opportunity to support the causes that are important to them. Women tend to use money to look after everyone else before themselves, and to be interested in the wider community and environment for the next generation. Through investing responsibly they can use their capital to have a positive impact on the wider environment.
What is NatWest Group doing to close the gender investment gap?
NatWest Group has identified ‘improving financial capability’ as a focus area and is looking to address the savings and investment gap in two ways.
This includes supporting female entrepreneurs to promote wealth creation and identifying to help with Financial Health Checks to review their personal finances. At Coutts, we do this as a matter of course through annual client reviews which helps establish our relationship with clients.
Camilla Stowell, Head of Client Coverage for Coutts
We’re working hard to make sure that we talk to customers in a way that works for them, meaning we’re more inclusive and accessible and can help support financial goals. This has helped us gain a 185% increase in female investors in Personal Banking, a 20% growth in Premier Banking, and an 81% growth in Coutts, year on year. We’re also keen to support our female colleagues, running a series of events through our Wealth Gender Network.
How can women make the most of their investments?
The main recommendation is to start now. However much or little you can afford, it all adds up. Make sure you’re enrolled on your workplace pension or consider starting a small private pension if you’re not eligible for a workplace pension. And, lastly, don’t be scared to talk about money with your partner. Whilst it might feel uncomfortable, it’s essential to understand how your finances are being used and how to manage them.
Determine why you want to increase your savings
Having a clear goal in mind when you’re saving money makes it far easier to stick to your plans. Are you saving for a car or a big family vacation? Do you want to redecorate your house or pay off your student loans faster? Figure out what your goal is and write it down. You can then display that goal somewhere in your home so that you can be regularly reminded.
Set up a separate savings account
Having a separate bank account for your savings is important if you want to reach your goal. You’ll find it easier to track your progress and keep your money separated this way. Additionally, you could get better interest on your savings by shopping around for a high-yield savings account. You might also consider investing in stocks and shares with an ISA so that you get the highest payback possible from your savings.
Review last month’s spending
The next step is to print off your bank statements and carefully review your monthly spending. Categorise your spending into categories such as bills, household essentials, entertainment, groceries, transport, memberships and so on. You can then go through each of these categories and make note of areas where you could be saving money.
Set monthly goals
You have your yearly goal ready. Now it’s time to set achievable, monthly goals. When saving money, you’ll need to do one or both of the following: reduce your spending and increase your income. When it comes to reducing your spending, go back to those categories you set up and pinpoint where you could be saving. For example, you could switch smartphone plans, cut back on takeout food or meals out, cancel a TV subscription you’re not using, or even change your energy provider.
As for increasing income, this might be difficult if you already have a full-time job and there’s no chance of getting a raise. Luckily, there are ways you can make money online, such as filling out surveys, completing admin tasks, or freelancing. This list of the best websites to make money online is a good place to start.
Set up transfers to your savings account
It’s an obvious tip, but you’ll need to regularly transfer money into your savings account if you want to save. For this you have two options, you could set up automatic transfers or manually transfer money every month. Automatic transfers are great as you don’t need to think about your savings as much as the money will automatically come out of your monthly budget. Manual transfers are more flexible, so during months when you save a bit more money you can send more money into savings while during more expensive months you can send a smaller amount.
Celebrate your successes
The end goal of increasing your yearly savings will be a huge milestone, but it’s important to celebrate along the way too. Treat yourself at regular stages of your saving journey, perhaps taking some inspiration from this list of ways to treat yourself for free.
New research analysed by savings and mortgage provider Nottingham Building Society, known as The Nottingham, ranked regions on saving habits and total savings in order to discover the most savings-savvy locations in the UK.
The HMRC data revealed that people in the South East of England are the biggest savers, with a healthy average of £32,984 in their ISAs - over £5,000 more than the national average ISA market value of £27,606.
London has the second highest ISA average of £30,624, despite the high cost of living within the capital, closely followed by the South West, with average ISA savings of £29,397.
The region with the least saved in their ISAs is the North East with £21,749, followed by Northern Ireland (£23,028) and Wales (£23,295).
The top UK regions with the most amount of ISA savings on average are:
- South East (£32,984)
- London (£30,624)
- South West (£29,397)
- East of England (£29,364)
- Scotland (£28,044)
- West Midlands (£25,220)
- North West and Merseyside (£24,630)
- East Midlands (£24,517)
- Yorkshire and the Humber (£24,368)
- Wales (£23,295)
Further research from a study of nearly 175,000 UK residents, conducted through YouGov Profiles, has revealed Brits’ top reasons for saving. Over a third (34%) of people are saving for travel or holidays, while more than a quarter (28%) say they’re saving for a rainy day. Retirement was the third most popular life event to save for, with a fifth (20%) saving for our golden years, while one in seven (14%) are saving for a house deposit.
Jenna McKenzie-Day, Senior Savings Manager at The Nottingham said: “Twenty years after its launch, it’s great to see so many savers making the most of their tax-free allowance with an ISA. To those that haven’t yet started saving, these average amounts may seem high and hard to achieve but the sooner you can start, the better. Our savers are always sharing their tips and sometimes small changes can be a great place to start building your savings habit. The most popular tip is keeping a money diary to keep track of your finances and see where savings can be made. By writing everything down, it becomes clear where any unnecessary outgoings are happening.
“Another great first step is opening a savings account. Whether it’s a holiday or a home you’re saving for, it is important you choose the right account for your goal. Our customer data has shown that Starter ISAs and Easy Access ISAs have proven popular so far this year, as they made up 81% of all ISA accounts opened in April 2019. Furthermore, our LISA has been our fastest growing product for first-time buyers with seven times more people opening a LISA compared to its closest equivalent, the soon to be redundant Help to Buy ISA.”
Recently released HMRC data* shows that the money being invested in Innovative Finance ISAs (IFISAs) has increased by over 700% in the last year with six times more people now saving into an IFISA.
The amount of money now in IFISAs has risen from £36million in 2016-17 to over £290million in 2017-18. The data also shows that over 25,000 people opened IFISAs in the last 12 months. Just 5,000 accounts were open in 2016-17 and this rose to 31,000 in 2017-18. One of the reasons for this sharp rise may be due to the low return’s savers are getting from other types of accounts such as Cash ISAs and every day savings accounts.
Commenting on the data, Paul Sonabend Commercial Director of Relendex, a Peer-to-Peer lending exchange dedicated entirely to financing UK property, said: “IFISAs are giving savers the chance to earn high returns on their money. The interest rates offered on these products outstrip the rates offered by high-street lenders on traditional Cash ISAs which can be as low as 0.2%. With inflation running at 3.4%**, traditional savings accounts which are not matching the rate of inflation are losing money in real terms.
“IFISAs now offer savers sensible alternatives paying more than a cash ISAs, without the level of risks and volatility of Equity ISA’s. These returns are not magical, they are produced by taking the banks out of the picture and giving the lion’s share of the interest paid by borrowers directly to savers. For example, the Relendex Secured Portfolio ISA offers rates of up to 6% ensuring that savers are seeing real benefits from their hard-earned savings.”
The UK Government introduced the IFISA on 6th April 2016. The IFISA allows individuals to use some (or all) of their annual ISA investment allowance to lend funds through the growing Peer-to-Peer lending market, whilst receiving the tax-free benefits of ISAs.
The biggest investment most people make in their lives is usually buying a home. It has always been however, an ambitious thing to do, and now, in 2017, more so than ever. Below Finance Monthly hears more on the risks of a lifetime ISA from Stefano Giudici, Marketing Manager at Money Farm.
For young people aspiring to buy their first home, speculation about a future slump in house prices could be good news, but for those people who have only just started saving for a deposit, a fall in house prices in the immediate future will come too early.
Average property prices and minimum mortgage deposits
Generally speaking, the smallest deposit to secure a mortgage is 5%. Most lenders are currently asking for a minimum deposit of 10%. According to Halifax, and as reported on the BBC website, the average UK house price fell to £218,390 in June. This means that as a minimum, a deposit of nearly £22,000 would be required.
Of course the larger the deposit you can put down, the small the mortgage; so it’s advisable to save as much, as quickly as you can in order to make mortgage repayments affordable. The best mortgage deals you can make at present require a whopping 40% deposit.
The new lifetime ISA
The government has stepped into the picture to try and help first time buyers by launching the Lifetime ISA or LISA for short. This is a new platform that is designed to take over from the current Help to Buy ISA. To be eligible for the new LISA you must be aged between 18 and 39 years old.
If you do use your LISA to help you to buy a house valued at up to £450,000, the government will add a 25% bonus. The only problem is that if you have to withdraw anything from your LISA for emergency expenditure before you buy a property, the penalty is severe. It amounts to 25%, all of which has to be paid to HMRC.
Beware of accessing LISA investments before you buy a house
The problem for many people who want to invest in their future is that they do not have much disposable income. If all their savings are tied up in a LISA they will have no choice but to access them if an emergency or unforeseen situation arises. This could cost them dear and make a big hole in their home purchase plans.
It is because of this that the FCA advises that investors should only opt for a LISA when they are confident they will not need to access their investment before buying a first home.
LISAs can also be used as an investment for retirement. However, in this context, this 25% penalty can also catch you out if you have to access your savings before you’re 60.
Advice from the FCA
What this means is that for many people, investing in a LISA might not be wise. They would be far better off by using another platform such as a stocks and shares ISA. Although there is no government bonus, the gross total AER would, over a period of time, probably exceed what you would have been given in the way of the government bonus.
The beauty of a stock and shares ISA also is the fact that you can access your investment if you need it, without penalty, in something like 5 to 7 days on average.
What it all amounts to is that you need to be aware of the advantages and the pit-falls that the various investment platforms have. The best thing to do before you commit yourself is to seek advice from an IFA.
