Gender Wealth Gap at Retirement

Wealth equity is about the fair distribution of assets and financial resources amongst different groups in society. This wealth can include things like property, savings and investments. Inequity can lead to differences in levels of financial security, economic opportunity and quality of life. In this piece we focus on gender equity as one lens of overall wealth equity. We focus here on the issue of gender wealth equity at retirement.
 
The WTW Global Gender Wealth Equity Report looks at the intermingled effects of pay, career progression, financial literacy and events that occur during women’s working lifetimes that inequitably affect their wealth at the end of their careers relative to men – what we called the gender wealth gap. There is a significant gender wealth gap at retirement and the causes and effects of this are wide reaching. At the end of a working career, women have accumulated 74% of the wealth that men have (source: Global Gender Wealth Equity Report by WTW and the World Economic Forum).
 
What are some of the key findings of this research?

1. As above, an average across the 39 countries included show that at the end of a working career women have accumulated 74% of wealth that men have. This drops to 71% for the United Kingdom.
2. The main drivers of gender-based wealth differences are gender pay gaps and delayed career trajectories. Career absences due to maternity leave and responsibilities outside of the workplace influence women’s participation in paid employment and their ability to build wealth.
3. Gaps in financial literacy increase the divide between men and women.
4. Women in senior positions show the largest gaps in accumulated wealth.
5. Caregiving has a negative impact on women’s ability to accumulate wealth. Caregiving responsibilities leading to part-time work and career breaks affect women disproportionately compared to men.
6. Retirement plans are a significant component of accumulated wealth. The Wealth Equity Index revealed the importance of employer-sponsored plans.

All the above have a compounding effect on wealth accumulated at retirement but what can be done to bridge this gap? More financial education is needed to help build women’s confidence about investing and saving for retirement. At a corporate level, employers can implement holistic strategies around gender equity such as promoting equal pay and career progression, encouraging financial literacy and confidence for women, enhancing caregiving support and promoting flexibility in the workplace.
 
To understand the extent of the gender wealth gap and disparity in male and female wealth as accumulated over a career life cycle, WTW has developed the Wealth Equity Index (WEI) in collaboration with the World Economic Forum. Put simply, the WEI represents the gender wealth gap between men and women at retirement. The WEI is a number between 0 and 1, with 1 indicating no difference in accumulated wealth between genders and indices closer to 0 indicating the highest differences, see chart below.

atomos is a member of a collaborative group called the Thinking Ahead Institute which recently hosted a podcast on this topic featuring guest speaker Helen Howcroft, one of our Private Client Directors. In the podcast, Helen explains that women deal with finances differently to men and can often struggle with having confidence. During her career, Helen found that women were less likely to engage with finances and were often overwhelmed when having to make financial decisions. This can lead to women holding lots of money in the bank (rather than investing it), not maximising tax planning opportunities and suffering from decision paralysis. All of which can lead to overall lower wealth accumulation. Helen says “We need to feminise the financial industry. So much of the industry is very much based on the way that men engage with their finances. We need to add the women’s oomph and really start thinking about how women engage”.

The Noise

• British consumer confidence held at an almost three-year high in August, supported by improving sentiment around personal finances and major purchases. The GfK consumer confidence index is Britain’s longest-running gauge of economic morale among members of the public, and was steady in August, matching July’s 34-month high. The survey follows mostly positive news from companies since Prime Minister Keir Starmer’s Labour party took power in early July. The first rate cut since the start of the pandemic on the 1st of August will certainly have boosted morale. Further rate cuts will likely not come as quickly as hoped, with the Bank of England preaching a slow and measured approach.

• US job growth was likely far less robust in the year through March than initially reported, as the number of workers on payrolls will likely be revised down by 818,000 for the 12 months through March. This was the largest downward data revision since 2009, keeping pressure on the Federal Reserve to cut interest rates next month. The revisions suggest the labour market started moderating much sooner than originally thought. The revisions shouldn’t come as too much of a shock, given estimates were for one million fewer jobs. This doesn’t challenge the idea that the US economy is still expanding but does signal that we should expected more muted growth going forward.

• China has been leading the charge for renewable energy, having installed more than 180 gigawatts of solar power in 2023, compared to 58 gigawatts across the whole of Europe. This week they passed another milestone, surpassing Chinese president Xi Jinping’s renewable energy target six years earlier than planned. Xi set a goal in December 2020 for at least 1,200 gigawatts generated from clean energy sources by 2030. With China adding 25 gigawatts of wind turbines and solar panels in July, capacity reached 1,206 gigawatts. China by far outspends the rest of the world when it comes to clean energy. The rapid growth in clean energy capacity may mean the world’s biggest polluter has already reached peak emissions well before its 2030 target. Still, renewables have only generated about 14% of the electricity in China so far this year, and more work will be needed to grow that share and continue to push fossil fuels out. 

The Numbers

The Nuance

Having gained almost 20% through the first four months of 2024, oil has now shed all of its year-to-date gains. OPEC+ supply curbs that are meant to prop up the price of oil by restricting supply have been overshadowed by a variety of economic factors over the past few months. Among the factors causing a fall in oil prices is a slowing Chinese economy, the top oil importer.  In China, economists are calling on Beijing to move away from an implicit budget deficit ceiling. They believe that more government borrowing will help deal with the challenges of the property market slowdown, weaker fiscal position of local governments, and sluggish household consumption.

A renewed push in recent weeks for a ceasefire in Gaza has also helped ease supply worries and weighed on oil prices. A gradual slowdown in output and poor near-term economic outlook in major economies in recent months has also hurt oil demand. Data this week showed US manufacturing contracting at its fastest pace this year and coupled with signs of labour market softness contributed to the steep decline in prices seen this week.

Some analysts are saying that we may see oil prices creep back up in the coming weeks as global inventories have declined over the past two months. The market however will continue to look closely at OPEC plan to do next. The producer group already announced plans earlier this year to increase output in the final three months of the year. Prices were considerably higher at that time however, so we could see those plans delayed in an effort to provide continued price support via supply restriction.