Why it's time to close Britain's investment gap: Sarah Coles

You can see the point he was trying to make, because women are less likely to invest than men. The government’s most recent ISA statistics run to the end of the tax year in 2021, when 2.1 million men had paid into a stocks and shares ISA – and just 1.4 million women had. However, this ad buyer hadn’t stopped to consider why – or whether this was an immutable fact.

The most obvious reason is that on average women are paid less than men, so they’re less likely to have money available for investment. We ran a piece of research in May and asked people what they would need in order to start investing, and while ‘more money’ was the most common answer across the board, women were far more likely to say it. The ISA statistics show that the more we earn, the more likely we are to choose a stocks and shares ISA over a cash ISA, and women earn less on average.

However, this is only part of the picture, because we also know that women are more likely to save than men. Overall, they hold more ISAs: in April 2021 under 11 million men had an ISA – while around 11.5 million women did. It means women are freeing up the cash – they’re just more likely to save than invest.

In some cases, this makes eminent sense. Once you’re on top of expensive short-term debts, the first step in anyone’s financial plan is to build a robust emergency savings safety net. As a rough rule of thumb, while you’re working age, this should cover around 3-6 months’ worth of essential expenses. When you’re retired, it should be closer to 1-3 years’ worth. You should also be building savings for any expected expenses over the next five years. This is a tall order, and plenty of women will be working towards that.

However, there’s every chance that once this is in place, women will continue to save rather than invest. In the past, an awful lot of this has been put down to women not wanting to take a risk. Certainly there are those who don’t. Lower average wages mean risk needs to be taken very seriously. However, this isn’t a particularly female trait. When we asked non-investors what would persuade them to invest, over a third of both men and women said they’d never invest because they don’t want to take a risk.

Some of this boils down to a tendency to overestimate the risk involved in investing, and underestimate the risks of holding cash. Ten years after the financial crisis we asked people what they thought had happened to the stock market since, and only a third of women were aware it had recovered. Crashes are big news, and gradual gains don’t make headlines, so it’s easy to miss the fact that over time, the stock market tends to grow. Meanwhile, we can overlook the fact that cash tends to lose value after inflation.

However, a big piece of the puzzle is the fact that millions of women don’t feel they know enough about investment to get started. When we asked what would make them invest, among women, the second most common answer was ‘if I knew more about it’. They were far more likely to give this answer than men – at around one in four compared to one in five men.

Lots of people don’t understand investments – regardless of gender. In a recent study, we asked people about their understanding of investment concepts, and 16% said they didn’t understand what a share was and 31% said they didn’t know what a fund was. It’s hardly surprising, because most of us were never taught about it at school, so unless we specifically took an interest, we don’t know enough about it. The research shows men have tended to take more of an interest later in life. Women are twice as likely to say they don’t know what an investment fund is – at 42% compared to 18% of men.

But while there may well be a gap in knowledge among women, that’s not all that’s going on. A few years ago, we ran a small study asking women and men how much they knew about investments, and then asking specific questions to test their knowledge. Men only knew marginally more about investing, but felt much more confident about it. It seems women need a higher level of knowledge to feel secure. Whether it’s a gap in knowledge or just confidence, the two have the same impact. They hold back an enormous number of women – who are afraid of making a mistake.

You might ask whether this really matters, and whether women need to be interested in investment, but the fact is that most of us invest – thanks to automatic enrolment into workplace pensions – and it’s only when we understand investment that we can make the most of our pensions. We know there’s a huge gender pensions gap, and we know it’s incredibly difficult for women to fill this by paying in more while they’re younger or making up for it later. Making better investment decisions could cover some of the hard yards for them, with sensible investments designed to produce the growth they need. This isn’t a theoretical equality issue, it’s a vital financial one.

There has been some progress. Over the past few years, personal finance has made its way into women’s magazines, and investment has started to edge in too. You’re still far more likely to see an advert for age serum than a pension, but there have been some steps in the right direction. There’s an awfully long way to go, and it’s up to us all to close the gap – whether that’s exploring investments ourselves, or talking to the less financially engaged women in our lives, and getting them to give it a go. HL has launched a Financially Fearless community for women, but there are hundreds of places you can start.

Hopefully, over time, investment understanding will be so widespread that we have no need for any of this. And one day when a woman and a man walk into a bar with a horrible joke about a niche, they can be sharing the fact that Sean Connery has finally found his niche – she was in the garden chatting to his nephew.

Retirement regrets

Our research shows that more than one in five people regret not getting to grips with retirement planning earlier. Retirement feels like a long way away when we’re younger, so other issues seem more pressing, and we push pensions to the back of our mind. By the time we get round to it, we realise we’ve left it too late.

Not making bigger contributions is another big regret with almost one in five wishing they had put more away over the years. However, it is never too late to make a difference. If you can afford to boost your contributions, you can still significantly improve how much you end up with – whatever your age.

SARAH COLESHead of Personal Finance and Podcast Host for Switch Your Money OnHeadline Money Expert of the YearHargreaves Lansdown