The gender savings gap: Men are more likely to invest in an Isa while women opt for cash

Men are more likely to hold investment Isas, while women prefer cash Isas, especially in their younger years, new research reveals.

About 35 percent of Isa investors between the ages of 25 and 34 are women, and they never reach parity with men, although the figure reaches 46 percent at retirement age.

Meanwhile, 45 percent of Isa’s youngest cash investors are men, and this ratio hardly changes as they age, according to official data analysis by AJ Bell.

The firm notes that sticking to cash has a big impact on long-term wealth compared to investing, and the study mirrors much other research showing a significant gender gap in financial assets, such as pensions, in old age.

The main causes are already well known: women earn less than men and spend periods of their lives doing life-saving but unpaid care work.

In general, people are recommended to save an emergency fund of three to six months of salary in an easily accessible Isa before starting to invest.

If you earn a lower salary, then you’ll have to spend more on daily bills and you’re less likely to reach that point of relative financial security and start investing in an Isa or putting more into a pension until later in life.

The age data below shows that women are increasingly likely to have an investor Isa as they get older, and therefore have had more time to save and acquire financial assets.

Source: AJ Bell and HMRC, based on latest Isa contribution data for 2020-21

Meanwhile, new independent research from Standard Life found that 26 percent of those with money are more likely to put extra money toward their pension compared with 17 percent of women.

“There is no single good reason why men should have more money than women, whether it be in savings, investments or pensions,” says Baroness Helena Morrissey, who runs AJ Bell’s Money Matters campaign to get women Invest to improve your finances. position.

Morrissey says that factors that make women less likely to invest include the gender pay gap and the financial impact of having children and menopause.

AJ Bell calculates that if someone saves the average Isa contribution of £8,690 a year in a cash account and earns an average long-term return for cash Isas of 1.13 per cent, they would have almost £92,500 after 10 years.

However, if they had invested the same contribution each year and earned a 5 per cent annual return, they would have almost £115,000 after a decade. That £22,000 gap widens to nearly £106,000 after 20 years.

This summer, the Department for Work and Pensions released the first official measure of the gender pension gap, showing that women reach age 55 with one-third less saved in private pensions than men.

We’ve rounded up advice from money experts on how women can maximize their pensions (advice that men worried about a deficit can also benefit from) and look at them below, too.

How to manage your pension if you fear that you will fall short

1) If you are concerned about whether you have saved enough, research your existing pensions. In general terms, it is necessary to ask the schematics the following questions.

– The current value of the fund.

– The current value of the transfer, because there could be a penalty for the transfer.

– If the pension is based on final salary or defined contribution. defined contribution Pensions take both employer and employee contributions and invest them to provide a reserve of money at retirement.

Unless you work in the public sector, they have now mostly replaced the more generous gold plated ones. defined benefit – average or final career salary – pensions, which provide a guaranteed income after retirement until death.

Defined contribution pensions are more stingy and savers bear the investment risk, rather than employers.

– Whether there are guarantees (for example, a guaranteed annuity rate) and whether you would lose them if you moved the fund.

– The projection of the pension at retirement age. You can use a pension calculator to see if you will have enough; they are widely available online.

2) You need to add your forecast figures to what you expect to receive in state pension, which is currently £203.85 a week or around £10,600 a year if you qualify for the new full rate. Get a state pension forecast here.

3) If you are tempted to merge your old pensions, read our guide first to make sure you won’t be penalized.

4) If you have lost track of the old pots, the The free government pension tracking service is here.

Be careful when you search online for the Pension Monitoring Service, as many companies using similar names will appear in the results.

They will also offer to look for your pension, but they will try to charge you or whip you for other services, and they could be fraudulent.