New report uncovers the life events that negatively impact women’s finances

Money Matters by AJ Bell, launched a new report on Wednesday 13 September, that provides a unique insight into the financial pitfalls that disproportionately affect women and means they have less money, on average, than men.

Financial Wobbly Bits: Uncovering women's financial wobbles and providing a toolkit to overcome them shows:

• Just a quarter of women carried on paying into their pension at the same rate during parental leave, compared to 70% of men
• Almost half of women have had their career and/or finances impacted by caring responsibilities outside of parenting
• 1 in 20 women who have gone through the menopause stopped working as a result
• Only 55% of women returned to work full time after having their first child, compared to 92% of men

The report is part of AJ Bell’s Money Matters campaign, which aims to help more women engage with investing and close the gender investment gap. Read the full report here.

Helena Morrissey, founding ambassador of Money Matters by AJ Bell, comments:

“Life is full of Financial Wobbly Bits. We know from our previous research that women have less in savings, investments and pensions as they face a more uneven financial journey than men. But we wanted to work out why. What are the financial pitfalls that disproportionately affect women, and mean that they have less money? 

“These Financial Wobbly Bits in life are often tricky to navigate and filled with emotion – from moving in with a partner to having your first child or hitting the menopause. Not all of them apply to every woman and for some they will be a minor speedbump while for others they will be a huge pothole. But we wanted to know how they affect the amount of money we have. What is crucial to this is looking at how can we stop that and fix the gender wealth gap – we don’t want to just uncover the problems but also want to provide the solutions to these financial hurdles that women face.

“The answers aren’t straightforward and there is no silver bullet. Some of the onus is on women themselves – asking for pay rises when they deserve them and pushing for the financial impact of family choices to be shared equally at home. Likewise, employers should continue to strive for the number of women in senior positions in their organisations to reflect the make-up of the wider business. Crucially, men have an important role to play too, and families can benefit everyone if they have open conversations about how they share the financial impact of caring responsibilities and time out from careers. The fourth element to this is financial services companies, which historically haven’t done a great job of marketing to women but many are now making strides forward in this area.”

The financial impact of children

• Only 55% of women returned to work full time after having their first child, compared to 92% of men
• Just a quarter of women carried on paying into their pension at the same rate during parental leave, compared to 70% of men
• On top of this 29% of women said they weren’t paying into a pension before they had children anyway, compared to just 8% of men
• Three times as many women than men say they both pay for and take responsibility for childcare

Despite many couples sharing the cost and responsibility of childcare and the advent of shared parental leave, the figures highlight that women still bear the biggest hit to their career when having children. The difference in a couple’s working patterns after having kids is stark. With their first child 92% of men who were working full time before they had their kid returned to work full time, compared to just 55% of women. This drops to a quarter of women by their third child, compared to 80% of men. 

For some women this will be down to personal choice, but for a huge number it will be the cost of childcare prohibiting them from returning to work. The average cost of full-time nursery for a child under two is £14,800 a year¹ – meaning that someone on a £40,000 annual salary would need a £24,000 pay rise on returning to work just to give them the extra post-tax income to pay nursery fees.

It's not just their main salary that takes a hit, more than a quarter of women stop paying into their pension when they take parental leave, compared to just 8% of men. We know this has a huge impact on women’s long-term wealth and is a big contributor to the gender pensions gap.

¹Based on Coram Childcare report 2023

Menopause: a hit to finances 

• 1 in 20 women who have gone through the menopause stopped working as a result
• 1 in 25 reduced their hours
• Others have had to use up holiday days, sick days or take unpaid leave
• A fifth of women said it had impacted their confidence at work
• An additional 12% said their performance had suffered

We know from our previous research that many women find the menopause a financially tricky time – with their symptoms often impacting their work and finances as well as their health. But these figures lay bare the direct impact it has on women’s money and career – from reducing their hours (and so salary) to taking unpaid leave or even leaving their job entirely – there is a direct hit to their wealth. 

Employers have a vital role here in helping to support more women through the process. More companies now have menopause policies, to provide flexibility for those struggling to keep working at the same pace, but these are often still lacking or not well publicised to staff. While it's understandably a period where your confidence takes a knock, women need to speak up at work to get the support they need.

Financial implications for grandma 

• Almost half of women have had their career and/or finances impacted by caring responsibilities outside of parenting
• For example, 15% of women gave up work, 18% cut their hours, 7% took a lower-paid job and 14% said it costs them money to do the caring

The eye-watering cost of childcare isn’t just impacting mothers who are taking career breaks, but also women later in life, as increasingly grandparents provide free childcare to enable their children to return to work. As expected, this disproportionately falls to women. At the same time, the so-called “sandwich” period of your life sees many women caring for elderly parents at the same time as providing free childcare for grandchildren. 

Women need to ensure they are claiming all the government support available to them, including claiming National Insurance credits for looking after children, but they also need to have open discussions with children about the financial burden, splitting the cost of caring for parents with other siblings, and asking if employers can adjust hours around caring responsibilities. 

Single tax: hurting women’s pockets

• Single people are less likely to feel confident that they will pay off their mortgage by the time they retire
• Just a third of single women are confident they can live comfortably on it compared to 56% of married people
• Single women have less in their emergency savings pot and less in their pension than the average married couple, and…
• …single women have less money saved than single men – so the gender gap persists even in singledom

We know that being single has an impact on finances, as people face higher costs from living alone, which has a big impact on their financial health. But for women, who are often already on the back foot when it comes to money, this compounds their financial issues. Our research shows that single women on average are saving less, putting less in their pension and are less confident about their financial future. 

When quizzed, three in five single women say that living alone has a negative impact on their finances. Let’s take pension savings: single women have an average of just over £29,000 in their pension, compared to £32,000 on average for all women. Single women also have less than single men, so the gender gap persists even among single people. 

Single women have less stashed away in their emergency savings pot than the average married couple. Some of this can be explained by single people being more likely to be younger, and so have had less time to have built up savings. But single women still have less money saved than single men: to the tune of £1,000 on average.

Many people will be single due to divorce, and the figures there are equally eye-opening. Three-quarters of couples who divorced didn’t take their pensions into account. Considering it is often the men who have the larger pension pot, this typically means women’s financial futures are at risk from not sharing in these pension assets.

About Money Matters by AJ Bell:

The Money Matters campaign was launched in 2021 and is led by Baroness Helena Morrissey, founding ambassador of Money Matters and founder of the 30% Club, alongside an all-female team from AJ Bell – including head of personal finance, Laura Suter; head of financial analysis, Danni Hewson; head of strategic planning, Emma Keywood; brand and sponsorship senior executive, Anya Gorton; and social media executive Rachel Peacock. 

Money Matters exists to encourage more women to engage with their finances. The campaign has campaigned for inclusivity, with podcasts, articles, events and other resources all designed to help promote inclusivity when it comes to investing. Find out more: ajbellmoneymatters.co.uk

These articles are for information purposes only and are not a personal recommendation or advice.