The Greatest Financial Risks For Women

While women are increasingly better educated than men, they earn less, feel less financially secure, provide the bulk of unpaid care, have smaller pensions, face greater hardship in later life and struggle to pay for their own old-age care a new report has found. 

A report published by the Chartered Insurance Institute (CII), has found that the greatest risk to women’s financial position are social and cultural expectations and relationships, and how these social ‘norms’ are making them more vulnerable to financial risk. 

The past few decades has seen an increasing movement towards equality, reducing gender gaps in employment and addressing the imbalance of time in unpaid work.  Home and family life has also become more balanced between the sexes, with fathers now taking a more active role in their children’s lives.  However, it is still women that do the majority of childcare and unpaid work.   

With the average life expectancy increasing, population projections showing more people needing care in later life, and government cuts to social care, the burden of care is increasingly falling on women.   Age UK reported in 2016 that the number of people in England not receiving the social care they require is up by 48% since 2010 to 1.2 million, and double the number of women caring for those who do not receive social care, with the report claiming “they are set to take on even greater caring responsibilities as the population ages.” 

Women who have had children before the age of 33 face a ‘motherhood pay penalty’, earning 11% less by their early 40s.   Single mothers experience an even larger pay gap, facing extra pressure with costs of childcare, leaving them even more vulnerable and financially insecure.   This is a stark difference to men, who experience a ‘fatherhood pay bonus’, with men who have children earning 21% more by their early 40s.  This allows men to have more of a resilience when life events such as divorce, affect their finances, leaving them with the ability to recover quicker, often being able to raise funds for a new home through mortgages, and able to make up the deficit after a pension sharing order.   

However, while men experience a fatherhood pay bonus, there can also be negative impacts for fathers.  With mothers being more likely to take primary responsibility for childcare, fathers often end up working longer hours and having less time to spend with their children. 

Cohabitation has doubled since 1996, and there are now over 3 million cohabiting couples, with the numbers increasing each year, alongside the rate of marriages decreasing.   Many still believe that they are offered protection as a ‘common-law partner’ when, in reality, they have very little protection, and less financial security, especially when there are children involved.   The financially weaker partner, often the woman, will generally have children residing with her, no access to a possible spousal maintenance and less ability to raise funds.   

Divorced women are far less resilient to financial risk meaning facing financial hardship in later life.  Having spent much of their life caring for others, women are left with insufficient pensions and savings to be able to pay for their own care.  Divorced women generally have less than a third of the pension pot their ex-husband has.   With the average age of divorce being in the mid to late 40s, and the fact that women face lower earnings in their 40s, especially after children, a divorce can have dire consequences on a woman’s financial well-being.   If a woman has reduced her working hours, or given up employment, to become the primary care provider for children, she is left with an even less chance of building up savings or a pension. 

The report found that of divorced or separated women surveyed , half with three or more children felt that their money would not last a month if they lost their primary income 

So what can be done, in family law, to protect women who are financially vulnerable? 

There is no legislation that states a financially weaker spouse is entitled to maintenance and often there is uncertainty as to whether it will be awarded by a court at all, meaning some women who feel they cannot afford litigation may avoid even trying to get an order in place.  

With the average cost of a divorce at over £14,000, it could easily scare a woman from seeking an order.  The costs need to be explained in full and weighed up with any benefit and possible amount she may receive.   It should also be explained that a court ordered maintenance can help towards the ‘income’ needed for a mortgage, something many women who have given up work to care for children, struggle obtaining.   The needs of the financially weaker spouse need to be adequately addressed. 

There needs to be more confidence in seeking pension sharing orders in a divorce.  With only 14% of divorces containing a pension order, this leaves many women with only the state pension to rely on, which may not be at its full rate if she has been unable to claim child benefit due to a higher earning spouse, and not met the minimum 35 years for the full pension payment.  The CII report states: 

“Although married women are generally entitled to a pension sharing order upon divorce, women without appropriate legal advice are particularly vulnerable to being left without protection. The average woman who expects to rely on a partner for income in retirement has just £8,335 in pension wealth, leaving her open to financial hardship if the relationship were to break down.”

For women who are not listed on the family property title, they should be advised to register a Home Rights Notice against the property as quickly as possible.  With homes usually being the biggest asset in a marriage, the rights need to be protected, both to the risk of being excluded and for any sale or mortgage arranged by the legal owner. 

Women who are cohabiting, are not afforded rights to spousal maintenance and homes rights and may only receive child maintenance if there are any children, and rights to a property if they are listed as tenants in common.  There is the option of a ‘cohabitation agreement’ however, that sets out how assets, property and finances are to be divided in the event of a split.   Other items can include any financial provisions over and above any child maintenance payments that may be payable.  Although not particularly romantic or cheap to have drawn up, they could leave a financially weaker partner less open to risk should the relationship end , saving thousands in court costs. 

Although many of the issues facing women and their financial risk need to be addressed culturally and socially, the legal industry can ensure that it is protecting the rights of women at difficult stages in their life, such as divorce.   

Huw Evans, Director General, Association of British Insurers, commented:  

“This report is genuinely shocking in highlighting the significantly greater risks women face than their male counterparts in our modern world. This should be a call to action for government and the financial services sector alike to find meaningful and lasting solutions to the challenges women still face.”   

Do you have any experience of how you have ensured the rights of your female clients?