What are the main parties saying about savings and investment inequality for women?
Date Posted: Thursday 5th December 2019
Women have lower levels of savings, are less likely than men to hold investments and have different priorities when investing. This means that government policy on savings and investment affects women and men differently. At this election several parties have made proposals for significant changes in the treatment of investment income – so how are these likely to impact on women?
As with so much else in the economy, the gender impact of savings and investment policy comes down to care. Women are more likely than men to spend time in unpaid care, which means they have less time for paid work, earn less and have lower incomes over their lifetimes. This spills over into the pensions gap when they retire (retired women have just over 10% of the private pension wealth of men). That’s one reason why state pension systems are an important part of the retirement-provision mix. They can credit carers with accrued pension during periods of unpaid work, whereas private pensions seldom do.
Less obviously, the same issues also affect non-pension savings and investments. The £10 billion a year of tax reliefs for capital gains, individual savings accounts and other saving vehicles are in theory available equally to both men and women. However, in practice, women’s lower average earnings and broken careers mean they have less capacity to take advantage of these opportunities.
Men and women are equally likely to have savings but women save less on average and women are less likely to be saving regularly (56% of women against 63% of men). Women are also less likely to hold investments, such as bonds and shares, with a greater tendency to hold cash savings.
Thus men would be more likely than women to be affected by proposals in several of the election manifestos (Green Party, Liberal Democrats and Labour) to put the taxation of gains and investment income on a par with other income. Labour would achieve this by equalising tax rates for wealth with income tax rates. Under Liberal Democratic proposals, it would involve abolishing the capital gains tax allowance and having just a single personal allowance to set against combined income and gains. The Green Party proposals are more radical, suggesting that most personal taxes be replaced by a new consolidated tax on income and gains. If the revenue raised by removing tax advantages for wealth was spent to help fund better public services and extending free child care, this would support greater gender equality.
Women and men also save differently to men. It is often suggested that women are more risk averse than men, but the case may be overstated. Women tend to save for different things; questioned about motives for saving, women are more likely to be savings for holidays, home improvements and children and more women than men (41% versus 36%) are likely to think that having an emergency fund is very important.
Where women do invest, evidence suggests there may be some gender differences. Women are more successful than men, achieving slightly higher returns through avoiding the most speculative stocks and switching less often which reduces their transaction costs. Research from Aberdeen Standard Investments has found that women show greater interested in investments that pay attention to environmental, social and governance (ESG) issues than their male counterparts (24% versus 20%). That could make women’s investing an important force in the light of measures across all parties’ manifestos aimed at encouraging investment in green technologies and, in the case of the Labour and Liberal Democrat proposals, requiring greater disclosure by companies and pension funds about their approach to ESG and long-term sustainability.