Investing in women: closing the gender gap

Each year, on March 8th, the world marks International Women’s Day (IWD) to renew our collective global commitment to achieving gender equality.

This year the UN is encouraging those to rally behind the theme “Invest in women: Accelerate progress” calling for significant financial commitment towards closing the gender gap. This is in line with the fifth sustainable development goal of achieving gender equality and empowering all women and girls by 2030.

“Achieving gender equality and women’s well-being in all aspects of life is more crucial than ever if we want to create prosperous economies and a healthy planet. However, we are facing a key challenge: the alarming $360 billion annual deficit in gender-equality measures by 2030,” says the UN statement.

The global economic inclusion of women

Since 2006, the World Economic Forum (WEF) has published global gender gap reports. The most recent report, from 2023, ranked the UK 15th out of 146 countries for gender parity*. The index reported that the UK had closed 73.1%* of its gender gap for economic participation and opportunity, where 100% is gender parity. The global score for economic participation and opportunity is 59.8%*.

Although we’re seeing a global narrowing, at the current rate it would take 169 years to close the global economic participation and opportunity gender gap*. Furthermore, in 2023, the World Bank reported that an estimated 2.4 billion women of working age lived in economies that did not grant them the same rights as men**.

How are women in the UK affected?

Research from NOW:Pensions revealed in 2023, women’s average pay is three quarters of men’s — or a gender pay gap of 25%***. While, the UN reports that the gender pay gap globally is around 20%.****.

The report cites that women need to work an extra 19 years to retire with the same pension amount as men***. As automatic enrolment starts at 22, this means that by age three, girls are already falling behind boys in their provision for later life. Additionally, women make up 79% of workers who earn less than the automatic enrolment earnings threshold – this means that 1.9 million women in employment are not automatically enrolled into a workplace pension***.

The “spiralling” cost of childcare is a hindrance to many working households, with the average cost of full-time nursery for a child under age two in 2023 being £14,800 a year, rising to more than £20,000 in London***. These costs are often a leading cause for a “career gap” with women spending, on average, 10 years away from the workplace to raise families or take on other care responsibilities. This is an estimated £39,000 in lost pension savings***.

In cash terms, by the time women reach retirement age (67), they will have average pension savings of £69,000, which is £136,000 less in pension savings than the average man, who will have saved £205,000 in the same period***.

What can I do to close the gap?

On average, women live around seven years longer than men***, meaning women’s pension wealth needs to go further. I think it’s fair to say most won’t have started their pension contributions at age three, which means there’s a hefty amount of “catch up” when it comes to building long term wealth and financial independence.

But while we wait for governments and employers to make changes to close the gap, there are ways you can help yourself.

First, we can start by asking for a pay rise. A study a couple of years ago found that men are much more confident doing this than women and I doubt that has changed over the past 24 months. Yes, companies have been struggling, but wages are going up in some areas. So, if salaries are increasing in your area of the workforce, make sure yours is too.

Secondly, we can invest earlier, invest more (if we can) and take on more investment risk. A continually perpetuated myth is that women are disinclined to take risk with their savings. However, myself and FundCalibre’s research director, Juliet, are some of the least risk-averse members of the team.

As Juliet says, “for me, this is rational, rather than reflective of any great optimism on financial outcomes. Smaller companies, for example, have a long track record of outperformance and therefore it makes sense to have a strong weighting there. It can be difficult to hold my nerve during periods like the one we’ve just seen, but I recognise that this is just the swings and roundabouts of financial markets.”

Why do I mention it? In theory, higher risk should equate to higher reward over the long term. Holding too much in cash can leave an investment portfolio vulnerable to inflation, or it may not grow fast enough for an investor to achieve their long-term investment goals – like a comfortable retirement.

Four ‘punchier’ funds to consider in your pension

Allianz China A-Shares

The fund concentrates on the stocks of companies that are incorporated in China and that are listed as A-shares on the stock exchanges of Shanghai or Shenzhen. The Chinese A-share market is very large, but also very inefficient, providing great opportunities for active funds like this one.

Schroder British Opportunities

One of the few products to be launched in response to the pandemic, and a new Rating from FundCalibre, this trust seeks to tap into the unloved status of UK equities by targeting companies which have been in the eye of the storm. Importantly, the trust can also invest a small part into private equity companies which increases the level of risk for investors.

IFSL Marlborough Global Innovation

A concentrated portfolio of fast-growing, innovative companies, the fund has a heavy weight to technology firms, but it will invest in innovative disruptive companies from any sector. The fund can invest globally but most of the investments are in the US or the UK. At least 50% of the fund must be invested in smaller companies, which can result in the fund being more volatile than other peers in the IA Global sector.

Ashoka India Equity Investment Trust

The trust aims to achieve long-term capital growth by investing in Indian companies of all sizes. The trust adopts a bottom-up stock-picking approach to target scalable businesses with sustainable superior returns on capital. Investing in a single country portfolio always carries high risk, which can be accentuated in this trust, as it has a reasonable allocation in mid and small-sized companies, which are traditionally more volatile than larger companies.

*Source: World Economic Forum, 20 June 2023

**Source: World Bank, 2 March 2023

***Source: NOW:Pensions, 7 February 2024

****Source: UN, 11 September 2023