By Anna Sofat
I recently read a report - Securing the Financial Future of the Next Generation – published by the Chartered Insurance Institute (CII) as part of their Insuring Women's Futures programme, the report looked at how women's exposure to risk has changed over the past century in the UK.
The report is highly comprehensive and takes an in-depth look at the patterns and risks in society that are women disproportionately bear.
As a financial planner specialising in assisting women, this report is particularly pertinent to me. As part of its analysis, the report identifies 6 Moments that Matter: key stages in a woman's life that expose her to particular perils and pitfalls.
These moments are:
Let's look at how these key moments affect a woman's earning potential.
Access to further and higher education is one area that women have fully embraced over the past 50 years.
Starting out in life, women have just as much opportunity to higher education as men in the UK - statistically, even more so, with 51% of girls and 42% of boys going to university (Hillman and Robinson 2016). From overall figures, women account for 55% of all full time students (HESA 2017h), and 57% of postgraduates (HESA 2017b). And just as we see at GCSE and A levels, women outperform men at University, with 73% of young women and 69% of young men achieving a 2:1 or higher (HESA 2016).
So, with more females attending university and attaining good grades, how is it that the gender pay gap exists?
If we take a look at the figures, it appears that initially, there is no difference in the pay of men and women on average in their 20s. However, by their 40s women earn 13% less than men and by their 50s, 16%.
The good news? The gender pay gap appears to be lessening – women in full-time work earned 17.4% less than men in 1997, by 2015 this was 9.4% less. Yet even at this pace, the gender pay gap is not set to close until 2050 (CII 2016). And against a backdrop of what we know about women's attainment in education, is it acceptable that a pay gap exists at all?
But how and at what point does the gender pay gap emerge?
Two key issues identified in the report pertain to the type of work women are undertaking.
For example, the report highlights that women make up only 17% of engineering, technology and computer science undergraduates and 37% of maths (HESA 2017c). These courses often lead to better paid jobs. This might go some way to explain why the London School of Economics shows that women who take out a student loan to attend university, due to lower earnings throughout their careers, are less likely to repay their student debts within the 30-year timeframe.
Whilst I accept that some of the issue must come down to career choice, it cannot explain all instances - there are plenty of professions where males and females work alongside other yet are not paid equally.
Which brings us to another major issue – working patterns.
Taking maternity leave or adoptive leave is a time that women have earnt over their careers. Becoming a parent is life changing and all of a sudden, your child becomes the most important thing in your life. Perhaps this realisation is the reason that 61% of mothers opt for part-time work after having children (Chanfreau et al 2011).
People often frame this statistic as a choice, but it isn't necessarily a free choice and it certainly doesn't make women any less skilled or valuable as employees. Despite this, the greater propensity for women to undertake part-time work reduces their earning potential throughout their working life. Women working part-time earn 30% less than those that are full-time (ONS 2016g).
There are clearly still lots of issues around women, motherhood and the workplace. For example, when you look at professional women taking career breaks, it has been shown that 3 in every 5 who do so return to lower skilled jobs (PwC, 30% Club and Reuters, 2016). There are a lot of statistics to digest here but the picture that emerges is clear - we have women achieving and attaining better during their education and early careers, but their earning ability compared to their male counterparts falling as their careers become more established.
Will this change in the future? I'm not certain. But I do know that as long as women have less earning power than men, it's vital they have the knowledge and access to manage their finances.
I have worked with many women over the years, some of whom have incredible depth of knowledge relating to their finances, but others who simply do not know where to turn. Myself and my team pride ourselves on not only giving clients a great service and value for money, but also empowering them to make informed and intelligent decisions. My next challenge is to bring that educational piece to a more mainstream audience which will play a vital role in how women shape the next 10 years in business.
Anna Sofat is founder and MD of Addidi, the Voice of Women's Wealth. Addidi recently won Money Marketing's Small Advisor of the Year award and has featured as one of the Top 100 Advisory firm by the New Model Adviser magazine in 2012, 2013, 2014, 2015, 2017 and 2018. Prior to founding Addidi, Anna was the MD at Fiona Price & Partners, the first business set up specifically to provide financial advice for women by women.
As well as advising private clients, Anna is a regular contributor to national press and TV. Anna has been awarded the Unbaised.co.uk's Financial Adviser of the year award; nominated the Top female Adviser by FT's Financial Adviser in 2015 and was a finalist in the First Women 2017 Awards for the Finance category.
Away from work, she is married and a mother of two girls. Her interests are her family, travel and current affairs; in the past she has served as an elected Councillor on Rochester City Council and Halling Parish Council. She was also a non executive director for the social enterprise, Fair Finance from its inception in 2005 to 2014.
