The pay gap is just the start

Equal Pay Day this year is on 20 November. Taking the pay gap into account, the Fawcett Society calculates that this is the day when women effectively stop being paid for that year’s work. Women are effectively working for well over a month with no pay when you compare their pay to men. It’s even longer than this time last year – when equal pay day fell two days later.

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But it doesn’t stop there. Equality of financial resilience is not just about what women earn, it’s about what that means for them – what they have and what they keep. The pay gap between men and women is 13.1% when you consider all workers, and 7% when you focus on full-time workers (ONS).

There’s very little difference when we’re younger - in fact on average women aged 18-21 earn more than men of the same age. It’s not at the typical age of childbirth that the gap starts to open either, it’s later in our 40s, when the burden of caring responsibilities is still overwhelmingly shouldered by women. It’s arguably a flexibility gap or a cost-of-childcare gap as well as a pay gap.

In some cases, women are more likely to make career compromises to accommodate parenthood – including working part time, taking a job that’s closer to home or working from home. Meanwhile, some drop out of the workplace for a period. Others take a step back, expecting to return to work when the children are older, when their plans could be disrupted by elderly parents needing support or issues getting back to work after a period out of it.

The impact

Lower earnings can mean women need every penny to make ends meet, so they have less opportunity to build up emergency savings. We know women are exceptionally strong savers – they hold more cash ISAs than men do. However, for some on lower earnings this isn’t an option. Women are overwhelmingly more likely than men to be single parents, and only around a quarter of them have at least three months of essential spending in an emergency account – the least financial advisers would recommend.

Then there are long-term issues, like the enormous 35% (DWP) gender pensions gap, that means huge numbers of women will either spend retirement struggling – or reliant on a partner. Women are also less likely to invest, 51% of men say they invest, compared to 34% of women (Opinium survey of 2,000 people for HL in September 2024). This makes a major difference to their future financial resilience and seriously hampers any chance of closing the gap.

What can you do?

The problems are clear, but the solutions are less so.

Women have a better chance of weathering the storm if they start saving and investing when they’re younger, although expecting them to do more than men to hit the same targets isn’t necessarily fair. The roll out of 30 hours of free childcare for children over the age of nine months, due to be complete in September next year, has the power to make a significant difference.

Three steps to take for yourself:

1. Surround yourself with the right support by getting a mentor and a coach. They’ll help you identify opportunities for growth and ensure you’re taking the right steps to advance in your career. You are your best investment.
2. Understand your worth in the market and ensure you’re being compensated fairly. If you're not, take the initiative to negotiate for the salary you deserve.
3. Don’t shy away from discussing the gender pay gap—whether at work, with friends, or with family. The more we talk about it, the more we can drive change together. Encourage transparency and advocate for equality in every sphere of influence.

Three steps you can also take as a household:

1. Plan together, so one of you doesn’t end up with all the childcare costs while the other has all the savings. Don’t divide costs ad hoc, rather draw up a budget and allocate things fairly.
2. Decide which costs are paramount. This will include things like the mortgage and may also include childcare. You also need to consider whether it will include saving, investing and pensions for each of you.
3. Don’t assume you can’t build a pension when you’re not working. The working partner can pay up to £2,880 a year into the pension of the non-earner, which will be topped up with tax relief to £3,600, even if they don’t pay tax. You’ll usually need to be at least 55 (rising to 57 from 2028) before you can access the money in your pension. Pension and tax rules can change and any benefits will depend on your circumstances.