Women typically beat themselves up about savings and investments. You’re in your 40s or 50s with a sinking feeling that you’re old enough to know more about money… but not old enough to have it sorted yet. You’re not 100% confident about where to start.
Only 12% of women have a Stocks and Shares ISA compared to 19% of men (February 2018).
Investing has traditionally been a male-dominated scene, but this is slowly changing thanks to advocacy like the Make Money Equal campaign from Starling Bank, regulation like the publication of gender pay gap statistics and increasing awareness from financial providers that women own a large portion of the investable capital in the United Kingdom (duh).
With the rise of DIY investing and app-based saving and investing products, more and more women are realising that not only do they have all the skill required to invest, they can start with as little as £25.
We'll tackle the thorny question of risk, discuss when investing might be a good idea, and tell you who we like.
The fact is, we all have excuses about why we’re not better with money. It’s boring. We don’t have enough of it. We’ll do it tomorrow. After we go on the raw food diet and practice mindfulness. Cough. But here’s a FACT. Since the stock market began, if you take any 10 year period, shares have done better than cash 9 times out of 10. Those are not bad odds for long-term investors. So give us the benefit of the doubt. Take 5 minutes to read this. Have a think. Because investing MIGHT be for you and you DON’T need to have a degree in Maths or to be a plus-four wearing chinless wonder to do it.
Every tax year you get an ISA allowance, which sets the maximum you can save within an ISA. This year it is £20,000 per adult. If you want to you can split this up between cash and stocks & shares – in other words one of each “flavour” and share the love around. You have to use your allowance by the end of the tax year and cannot roll over any unused allowance. Use it or lose it. If you want to get access to your money at any stage you can. It might take up to a week for your ISA company to sell up your investments and send you the cash.
Since the stock market began, if you take any 10 year period, shares have done better than cash 9 times out of 10. If you had stuck £20,000 in cash in 1996, that would have turned into £30,000 by 2016. In UK shares? Nearer £70,000. Stocks and Shares ISAs are tax efficient accounts for investing in stocks and shares. They aren’t totally tax-free – there’s a few tiny fiddly bits – but they’re not far off!
The pensions gap between men and women in the UK is really scary. Women in the UK will receive about £29,000 less in state pension than men over the course of a typical retirement according to the Financial Times. The average single woman is now £85 a week behind her male counterpart in retirement income, a figure that’s getting bigger, not smaller, over time.
There might not be anything you can do about getting older, but you can do something about getting poorer. Yes, it’s boring. It might still feel like it’s quite far away, or it might feel like there’s so far to go it’s not worth starting. It’s never too late to do something about saving, or possibly investing, for your retirement. We’ll go through some options for you.
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We made this image to show you what a fund might look like. You buy a slice of this fund, so getting exposure to these brands. The fund managers picks them all and manages them. So you don't have to stress about all the individual bits to buy.
Holly and Georgie discuss investing. Why might you consider becoming an investor, how much does it cost, what are the risks and rewards and why are people so afraid of it?
You open up the account. Add then you choose what to put into it. If you're new to the world of investing, pick a 'fund' which is like the ready-meal of the investing world. A balanced range of ingredients which someone else has put together for you.
Do not freak out and walk off if you haven’t the foggiest about where to start! In the same way that you wouldn’t stick your hand down the U-bend when your toilet is blocked, you can call the equivalent of an investment plumber.
A fund is like a ready-meal. Someone else picks about 50-80 shares, or investments, and blends them together for you. Quick and easy. They will usually charge you about 0.75% a year to do this – that’s £7.50 for every £1,000 you save into this fund. Our website page on funds will guide you to some decent options.
Things change and you are NOT locked in to this. However, do take care. If you withdraw the money, you lose the tax-free status. You won’t be able to put it all back in - we all have an annual limit of £20,000 a year to quarantine in an ISA. Instead you have to get your new ISA guys to transfer the funds over or it’s seen as a withdrawal, and you can’t stick it back in the tax-free pot. The good news is usually that your new chosen ISA will be salivating at the chops to get your business and so they will usually manage the transfer process and follow-up for you, once they’ve received your initial instructions.
The biggest two factors in this decision are:
Here’s a rule of thumb:
If your timeframe is five years or less then it’s likely that a cash ISA will be better for you.
Here’s why. The stock market jumps up and down. You’ve all seen those bumpy graphs on the news. But let’s think about this as if it were the housing market. Imagine you hear on the news that the property market is down 3% in your area. Do you freak out and run for the hills and stockpile baked beans? No – only if you are planning to sell that year. If you’re planning to buy a house, it’s good news.
Shares are the same. Unless you need to sell at that point in time, you can ride out the bad times. You lose money if you have to sell when things are on a downwards turn. If you can stick ear plugs in and wait for things to bounce up again, you will be fine. So, this is why time matters. If you need to get your cash next year, you’ve stuck your money in the stock market for 12 months and Trump does something daft and markets are miserable – well, you’re stuffed and your back’s against the wall. But if you can park your money for 5 years or more, it’s much less likely you will have to sell when things are rubbish. A well-respected survey, the Barclays Equity and Gilt Survey in 2014 found that, over 10 years, stocks and shares were 90% more likely to do better than cash.
The other thing is the worry factor. No-one can look you in the eye and guarantee that you will make money in the stock market. However if you are looking at more than a 5 year timeframe, the odds do favour the stock market. Cash ISAs will protect your lump sum, but your money is likely to grow at a much slower pace, leaving you exposed to the risk of inflation. The Barclays Equity Gilt Study of March 2014 said that “Over the last 10 years, cash has delivered the worst returns since the 1970s”. Gulp. The cost of living is also going up at a greater rate than interest rates. So money in a bank account is effectively going backwards – its purchasing clout gets lower every year. So it’s safe yes – but not a great way to save for your future or to make your money work hard.
If you have kids and are saving for them, do consider shares. Over 70% of Junior ISAs are in cash. This is nuts. If your child is under 8, for example, and this account therefore has a 10 year window (kids cant get the ISA money till they're 18) , just sticking it all in cash really doesn't make sense.
Do you have any idea what your retirement income might be? Most Wary Women will get the new State Pension when we’re 68, and the full whack is about £8,500 a year.
However if you have had career breaks and not got a full 35 years of National Insurance contributions you may not be eligible for the full amount.
Rules of thumb
Your State Pension will be about £4.70 x the years you have worked and paid N.I. To get all of it, you need to have been contributing for 35 full years.
Employed today? Make sure you are 'auto enrolled'
This workplace pension will see your boss paying in 3% a year for you by 2019
40 years old on £30k a year? This could tot up to about £140k by retirement age
Listen up ladies. This is more exciting than that scene in Thelma and Louise with Brad Pitt. The Government is so keen to get us all saving for our retirements that they give us free money as a pat on the head for doing so. Here's the deal:
Imagine your retirement income is a cocktail.
There are different types of pensions/shots you can add to it and the more you have, the stronger it is. Here's the outline of what goes into your final total pension amount.
1. The first shot – State Pensions are funded from National Insurance (NI) contributions and are intended to ensure we all have a basic amount of money to support us in our old age. The new State Pension is currently £164.35 a week BUT you’ll get nada if you haven’t got at least 10 years of NI contributions under your belt from working (or the relevant ‘credits’ from periods of illness of unemployment.) To receive the full £164.35 per week you need 35 qualifying years in the workforce.
And don’t believe the headlines – not many of us will get that. If you have less than 35 years, your pension will be pro-rated on your qualifying years. So, if you had 20 qualifying years, your pension would be 20 divided by 35, then multiplied by £164.35 = £93.91 per week. Brainfry? Don’t panic – if you are over 55 you can now go online to check your state pension statement. The pension statement will give you an estimate of how much you may receive under the new State Pension based on your current National Insurance record.
2. The second shot – My Workplace Pension (from your boss) The law has changed. Every employer has to offer their staff a pension. From 2019 you will have to put in at least 4% of your salary (or ‘qualifying earnings’ which is the total between about £6,032 and £46,350). The Government will bung in an extra 1% and your employer has to put in at least 3%. So that’s 8% which will be building up, month after month. The more you earn, the more you will save. You can refuse to take part (“opt out”), but it’s not a great idea because you’ll forfeit the 3% from your employer and 1% from the government.
If you have a final salary scheme, be really careful before moving it or fiddling. Some of these guarantees are like hen’s teeth these days and you will be worse off if you move it.
3. The third shot – a Private Pension – (from you) These are pensions which you set up by yourself – a bit like you would an ISA, or buying insurance online yourself. You choose the pension and you choose how much you can afford to put away each month. If you’re about 40 and save £25 a month, you could save a stash of about £21,000 by your retirement age. Assuming you take no tax-free cash, this would give you a pension of about £24 a week. This might all sound horribly boring BUT, if you’re a basic rate tax payer, for every £80 you put in, the Government will top it up with another £20. That’s free money. Higher rate tax payers can claim back even more – another £20 come tax return time.
The independent Government-backed Money Advice Service has a useful tool which will take your pensions saving, chuck in some background facts and give you an annuity quote - takes 10 minutes. Please don't just politely stay with the pension company you've always been with! Shopping around can literally make you thousands.
Keep going to Your Options for links, guides and our recommended Best Buys.
Want a steer on how much is involved? Check out Margaret who is 50 on £28k a year, Suzi who is 45 on £60k and Kerry who is 40 and on £40k.
In this audio guide, Holly and Georgie discuss pensions saving in your 40s.
This 90-second tour of private pensions runs through the must-know facts about how to maximise your pension pot.
Many women we talk to tell us that the stock market feels like gambling. It is volatile, yes. And not a short-term whim. But it is NOT like chucking it all on red.
With interest rates at historic lows, sitting in cash for years on end is not the smartest thing to do as a default position. You can set up a Stocks & Shares ISA online, from £25 a month and you don’t need to be a maths grad either. Over the last 15 years, £15,000 saved into cash would be worth about £19,465 today. In the UK stock market that would be £60,625. Time to find out more?
We’ll show you how to work out your “how much” on the back of a strictly metaphorical fag packet – State Pension, any workplace stuff and what could private pensions add to your mix? And although it’s a bit dull, aren’t you a little bit nosey to know how much you might have to spend every week when you're growing old disgracefully?
The Government does a pretty limp job of selling the main benefits of saving for this. You get £20 for free for every £80 you put into a pension. More if you’re a higher rate taxpayer. That’s the “Why bother” bit. Free money!
As for how, well, you can start from £25 a month, do it online in a tracksuit and a computer can’t patronise you with any “are you able to make a small financial decision, little lady” nonsense. You can outsource the investment decisions to the pension guys or take control and do it yourself.