Five steps women can take to ensure they aren’t left short of money

Sometimes it's hard to be a woman. The gender pay gap and the pension gap mean women earn less than men and are more likely to experience poverty in retirement. Being proactive about your finances isn't going to fix the structural issues that cause these gaps, but it could better position you to weather them. Here are five things you can do this International Women's Day to mind the gaps.

Ask for a pay rise

If you are a woman working in Ireland, it's likely you earn less than the man sitting next to you. In 2019, women's gross hourly earnings were, on average, 14.1 per cent below those of men in the European Union, according to Eurostat figures. In Ireland, the gap is 11.3 per cent.

Unequal pay for equal work is only part of the picture, but it is part of the picture. Proactively asking for your worth can help.

Women don't ask for pay rises as often as men. In fact, men are four times more likely than women to ask for a raise – and when women do ask, they typically request 30 per cent less than men do, according to research by Carnegie Mellon University economics professor Linda Babcock.

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To get paid your due, know your worth and ask for it, says Geraldine Gallagher of Inspire Coaching. "Women talk about a promotion or a job title, whereas, when I work with guys, they will talk about the money straight up," says Gallagher.

She encourages women to shake off their discomfort around figures. “Think of a ‘wish’ number, a ‘want’ number and a ‘need’ number based on your lifestyle and expenses. Putting figures in those boxes helps to stretch any limitations you have in terms of the monetary worth of your role.”

Know when salary review decisions are made, says Gallagher. “Go to your manager and say, this year, I’m looking for a promotion or a salary increase. Let them know you want to have the conversation.”

Then bring facts and figures to the meeting. If you are in a revenue-generating role, quantify your contribution. In other roles, cite project delivery metrics. Follow up with an email, making it easy for a manager to argue your case, she says. Whether you get offered a 3 per cent or a 7 per cent pay rise, know in the moment what it means for your pay cheque.

“Based on what you are doing and what you are expected to do, does it feel right to you? If the first offer doesn’t sit well, you need to express that.”

The Gender Pay Gap Information Bill will require companies to report annually on pay and bonus differences between men and women. This won't solve the myriad structural, cultural and policy issues causing the pay gap, but it will highlight how they hit women. In the meantime, ask for that raise.

Returning from maternity leave is a time when women can experience career derailment, unconscious bias amongst colleagues and a deterioration of professional relationships which impact pay and progression, according to research by DCU's Dr Yseult Freeney. Employers who treat pregnancy as a major disruption rather than a brief interlude should be enlightened.

“Have a conversation with your boss before going on maternity leave,” says Geraldine Gallagher. “Talk about your achievements, affirm your value to the organisation and say what you’d like to do when you come back,” she says. “At least then your boss can’t make decisions based on assumptions.”

Stop saving

You heard right. Women need to stop saving all their cash and invest it instead. Often more cautious than men, women with spare money tend to squirrel it away rather than grow it. Women's dependence on savings accounts is "recklessly cautious" according to investment expert and founder of the 30% Club, Dame Helena Morrissey.

Just 28 per cent of women feel confident about investing, according to a recent BNY Mellon IM survey, and this compounds financial disadvantages women experience.

The investment industry has been fairly rubbish at challenging women’s perception that investing is inherently high risk and that they need pots of money to do it. Women are missing out. A regular payment of €30 a month can be enough to get started. Investing on a monthly basis, rather than putting in a lump sum, helps spread risk.

Investing in shares in a single company is high-risk, whereas a fund will pool your money with others before investing, spreading it across a large number of shares. A basic tracker fund which follows the performance of a stock market is a good place to start. Look out for fees which can eat into returns.

"If you are investing, whether it's a pension or investment, for longer than five years, you should be taking on at least 60 per cent equities in a portfolio. You will do better in the long run with more equities if you are investing for longer than five years. Keep away from cash and bonds if you are under 50," says Carol Brick of Hermoney.ie.

More women investing not only means greater personal prosperity but increases their collective influence on corporate behaviour too. Indeed, if women invested at the same rate as men, there could be more than €2.84 trillion of additional capital to invest globally, with over €1.65 trillion flowing to more responsible investments, the BNY Mellon IM research says.

Career break, not broke

Women shoulder a disproportionate share of caring responsibilities, according to ESRI research. For working women, this can entail part-time work or taking a career break. This impacts their financial wellbeing now and in retirement. Some women, the lucky ones, can take steps to lessen the hit.

Planning ahead of an anticipated career break helps, says Daniel Hardiman of Hardiman Life and Pensions. He describes a client earning €40,000 before tax with monthly take home pay of €2,600. With childcare costs of €1,600 a month, the loss of income to the household was €1,000 a month.

By building up savings of €12,000 in advance and earmarking this for the career break, the family could enjoy the time much more, he says.

Individuals working for multinationals where share schemes are offered should make maximum use of them, says Hardiman. As part of the scheme, employers can allocate shares to employees up to an annual limit of €12,700. By holding the shares for a minimum three-year period, they are exempt from income tax, with the employee only paying capital gains tax on any increase in value.

“The benefit is twofold: you can’t spend this bonus during the three-year period and the shares have tended to rise significantly over the past 10 years. Over a career of five to 10 years with a multinational, these share options can result in a significant lump sum windfall that could fund a career break,” says Hardiman.

If you are taking a career break to care for children under 12 or a person with a disability over 12, you are likely to qualify for the Homemaker Scheme. This means your State pension entitlements won't be affected. (You must not work full-time while on Homemaker's; however, you can work and earn less than €38 gross per week).

Most parents in receipt of child benefit are automatically registered, but fill out the Homemaker Scheme form HM1 to be sure.

Pension gap

The average pension income of a retired woman is 35 per cent lower than that of a retired man, according to ESRI research. This pensions gap means the average weekly pension income is €433 for men and €280 for women. Across the EU, the risk of poverty at pension age is higher for women than men.

Policy makers and employers need to do much more to promote women’s employment and continuity of employment. In the meantime, there are steps you can take to bridge the gap.

When joining a new company, salary is likely to be the haggling point, but ignore pension at your peril. “Demand the best possible pension, which includes employer contributions, continuity of payments during maternity leave and allowances for breaks in employment,” says Daniel Hardiman. In today’s buoyant job market, you are in a better position to negotiate the best terms, or find another job.

If your employer doesn’t offer a scheme, or if you are self-employed, don’t let that stop you. A financial broker will advise you on the most suitable pension contract and also help you get tax relief from the outset, says Hardiman. “If you are in your 20s or 30s, invest in a fund that has at least 70 per cent invested in a diversified portfolio of global equities or shares,” he advises.

Women, as mentioned above, can sometimes be too cautious in their investment fund selection and this can ultimately reduce the value of their pensions, he says. Understand how any charges apply to your pension and start investing in it as early in your career as possible.

Counteract the impact of a career break on your pension by paying additional voluntary contributions (AVCs) one to two years in advance of the career break, or when you return to work, says Hardiman. "You get 40 per cent tax relief on any AVCs and this could make up for no contributions while you were on a career break," he says.

It doesn’t make sense to continue contributing to the pension while not earning as you won’t get tax relief.

Get advice

Some 61 per cent of women say they'd rather discuss details about their own death than talk about their money, according to Merrill Lynch. If the thought of a salary negotiation makes you wince, or the words "pension" and "investment" make the blood drain from your face, getting expert advice can pay dividends.

A career coach will help you value your experience and achievements with fresh eyes, they will tell you the market worth of your skills and give you tips on negotiating a pay rise.

Some 40 per cent of women said their biggest financial regret was not investing more, the Merrill Lynch research says. If figures aren’t your thing, a regulated financial adviser can help. They can help you review legacy pensions from old jobs and provide investment and pension advice to maximise tax relief and give you the best chance of returns.

Just don’t leave it too late, says Carol Brick. “Some people come to me in their mid-50s wanting to retire at 62. They are not starting soon enough. They are not being proactive enough. I am good at my job, but I’m not a wizard.”