Despite the 1970 Equal Pay Act and 2010 Equality Act, women today still earn about 10% less per hour than men. Policy is changing, driven by years of activism, enlightenment and regulatory changes, including the April 2018 mandate on gender pay gap reporting, but progress is slow.
The pay gap is the red flag at the tip of the underlying problem of the effect on women’s financial independence and security now and in the future. The lifetime savings challenge facing everyone in the UK is made harder for women because they earn less and, for those with families, they also have to factor in periods of no/reduced earnings.
HR departments are front and centre of the discussion and it’s important that they seize the opportunity to help their employees tackle this issue. Doing so will help improve retention rates, reduce stress, and, ultimately, improve business performance.
The savings challenge for women
The Lifetime Savings Challenge Report, commissioned by Close Brothers in conjunction with the Pensions and Lifetime Savings Association (PLSA), seeks to understand how employees are saving, where they need help, and the level of support available. It reveals that there is a clear and distinct gender savings crisis in the UK that needs to be addressed.
The report shone a bright light on the gender salary gap, revealing that the mean annual salary of women surveyed was £27,379, compared with £37,655 for men. What is especially striking though is the effect that this is having on saving, with two fifths (42%) of female workers believing that they don’t get enough salary and workplace benefits to save (as opposed to 27% of men).
Looking at the amount that women are accruing highlights the issue further. Women are twice as likely to have workplace savings of less than £5,000 than men, and they also have around a third less savings than their male counterparts (£22,173 vs £32,787).
What can be done quickly and at little or no additional cost is educating staff so that every worker becomes more financially aware, more confident in making better financial decisions, and is supported in making every penny count.
A key factor in this is that male workers are saving 40 per cent more over the course of a year: £3,660 vs £2,652. The average amount in a woman’s workplace pension scheme is less than half that of their male colleagues (£53,000 vs £120,000).
The gap in preparedness is also stark. The report found that more than half of female employees (51%) admit to feeling financially unprepared for their retirement compared with 35% of male workers. Only a third (36%) of female workers feel confident about choosing the right financial product, compared with 45% of men.
The employer’s role in bridging the gender savings gap
It is here that employers have the opportunity to make a real difference immediately. Moving to equal pay may take some time for some employers as they adjust to the added costs and responsibilities from recent legislation such as auto enrolment and real time reporting.
However, what can be done quickly and at little or no additional cost is educating staff so that every worker becomes more financially aware, more confident in making better financial decisions, and is supported in making every penny count.
The savings landscape is complex and can be overwhelming. Balancing different savings priorities, finding the best place to save, and knowing where to turn to for guidance is difficult, and only two fifths (40%) of employees are confident in their ability to choose the right financial product to help them achieve their savings ambitions. This figure is lower for women, with a third (36%) being confident compared with 45% of men.
In terms of where people go for advice, women are telling us that they’re likely to trust family or friends (27% compared with 21% of men) or personal finance websites (42% compared with 37% of men). Men, however, are more likely to trust financial advisers (20% compared with 13% women) or nobody at all (12% compared with 8% of women).
While a ‘one size fits all’ strategy may seem cost effective at first glance, its impact on employee financial wellbeing is likely to be limited.
It is clear that too few are accessing the help they need, a clear signal that employers can really add value by providing financial education and making sure it is used by their people.
HR departments looking to lead the charge for financial education have two jobs ahead of them. The first is to impress upon their leadership the importance of financial education in the workplace. Generally, employers seem receptive to financial education, with a majority seeing it as their responsibility, but it’s crucial they also recognise the business case for investment.
From our research carried out with the CIPD a year ago, we know that a quarter of people in the UK are suffering substantially with financial concerns and it is affecting their overall wellbeing and their ability to do their job.
A wage increase does not appear to be a magic bullet, with a third of employees believing a salary increase will not solve the problem. Instead, the solution lies in better education, ensuring that staff have the tools and confidence they need to take control of their money and the great financial opportunities offered in workplace benefits. More than a third (35%) of employees who had received financial education said that it had been useful in guiding their immediate, medium, and long-term saving decisions.
Effective financial education is crucial
After getting the go-ahead to run a financial education programme, the key is to implement one that will be inclusive, given the diverse needs of each workforce. The needs and goals of employees differ depending on where they are in their lifetime savings journey, so highlighting this and giving them the tools and support to meet these needs head on at every point in their journey is the goal.
While a ‘one size fits all’ strategy may seem cost effective at first glance, its impact on employee financial wellbeing is likely to be limited.
The delivery of the education is a vital component in its effectiveness. Online may be one aspect, but it can never be the whole solution. Everyone prefers face to face but it is also the most effective; women express a higher preference for it (35% of women would chose it first, as would 29% of men). If a business truly wants to help tackle the savings gap, investing in multi-channel education is likely to be most effective.
The savings crisis is thrown into stark relief when looked at under the lens of gender imbalance. The gender savings gap does not have a quick or easy fix. However, many of the steps along the way are relatively straightforward and painless, and can be implemented pretty swiftly if the decision is made to pursue them.
The paramount question is one of effectiveness and suitability, and the answers lie in listening to the audience you aim to educate.
