The gender savings divide: are women missing key tax benefits?

Jana Hlistova

Sep 29, 2024

Transcript

Welcome to our #255 weekly newsletter.

“For women taking control of their financial future”

-Jana Hlistova

From The Purse

In this week’s newsletter, we focus on research by Scottish Friendly which highlights that women are far more likely to hold their long term savings outside of tax-efficient ISAs or pensions. But women can take proactive steps to ensure their savings work harder for them.

***

And you can review the news in brief so you stay on top of global financial, economic and investing trends.

I hope you enjoy this week’s newsletter.

Until next week,

Jana

The gender savings divide: are women missing key tax benefits?

Women are far more likely to hold their long term savings outside of tax-efficient ISA or pensions.

A recent study commissioned by Scottish Friendly, in partnership with the Centre for Economics and Business Research, has revealed a significant trend: women are more likely to keep their long-term savings in basic savings accounts rather than in tax-efficient vehicles like ISAs or pensions.

According to The Standard, nearly half (46%) of women, compared to 39% of men, are opting to hold money earmarked for long-term goals in savings accounts instead of taking advantage of the benefits offered by pensions or stocks and shares ISAs.

What counts as long-term savings?

Long-term savings typically refer to plans that extend beyond five years, such as retirement funds, a deposit for a property, or capital to start a business. By relying on basic savings accounts, women miss out on higher potential returns from stocks and shares ISAs and are not fully utilising the £20,000 annual tax-free allowance ISAs offer.

The cost of missed opportunities

Additionally, by investing in a pension, individuals can benefit from tax relief, meaning that part of what would have been paid in taxes is instead directed to their pension. This helps reduce the overall tax burden and increases the potential for long-term savings growth. The amount of tax relief you receive is based on your income tax rate.

A gender wealth gap issue

For women, this trend is particularly concerning.

On average, women earn less, save less, and consequently have less money to invest. This tendency to keep long-term savings in low-interest accounts not only limits their potential for wealth accumulation but also exacerbates the already significant gender wealth gap.

This financial behaviour is costing women significantly, which as we know, extends well into their retirement years.

What can women do to close the gap?

Women can take proactive steps to ensure their savings work harder for them in the long term. A good starting point is reviewing where your savings are currently held.

Consulting with a financial adviser or using online tools can help determine whether a pension, stocks and shares ISA, or even a Lifetime ISA might offer better returns.

Setting up automatic transfers into these accounts can also help ensure regular contributions without the need for constant monitoring.

What next? (Re) listen to The Purse Podcast:

News in Brief

Financial news

World stocks hit record high after China stimulus push.
China CSI 300 on course for its biggest weekly advance since 2014 or 2008.
BCA's Marko Papic sees Chinese monetary & fiscal stimulus as a ‘fairly big deal’: this is Beijing’s 'Whatever It Takes' moment. He bets, that we are at the start of a major rotation out of US assets.
Europe's new debt problem child: France’s 10 year yields surpass Spain’s for first time since 2007.
UK government debt has hit 100% of GDP for the first time since 1961. As a Deutsche Bank chart shows, it is now the third debt super cycle since 1700 given the OBR expects debt to rise to 274% by 2073-74.
Hedge Fund legend David Tepper is buying ‘everything’ related to China, telling CNBC that “I didn’t know that they were going to bring out the big guns like they did.
The IPO conundrum: While the S&P trades at ATH, IPO activity has been almost nonexistent, when measured as a percentage of S&P 500 market cap.

Crypto: bitcoin, ethereum, DeFi

Bitcoin increased marginally in value this week, currently trading at $65,508 despite supportive macroeconomic conditions, including China’s recent stimulus measures and a US Federal Reserve rate cut.
US spot Bitcoin ETFs log highest inflow day since June, two-month high in total value.
Ethereum has extended its rally this week and it is currently trading at $2,650+.
BlackRock's spot Ethereum ETF has surpassed $1bn in value for the first time. Last week was only the second week since the funds launched that net inflows were positive, signaling renewed enthusiasm for the token.
Leveraged MicroStrategy ETFs are a 'Ghost Pepper' bet on Bitcoin—and they're booming.
Binance founder CZ walks free from US prison. He served four months in federal prison for charges including alleged violations of United States Anti-Money Laundering rules.

Coffee Break? Read This

We’d love to hear from you. Get in touch with Jana via the The Purse website or tweet @jointhepurse and janicka. We do no provide investment advice. Please do your own research or speak to a financial adviser.