Winners and losers in gender game

Sex has more to do with personal finances than you might think says James Daley

The gap between women's and men's salaries has fallen to its lowest ever level over the last year, according to new research published by the Government this week. However, when it comes to those in full-time employment, men are on average still earning about 30 per cent more than the opposite sex.

But the financial gender gap is not all one sided. Although women often lose out in the workplace, and subsequently on pensions too, they tend to get cheaper car and life insurance than men of the same age.

Although the European authorities have made several attempts to stop financial services companies basing their pricing on sex, there remains a number of statistical differences between men and women that insurers and pension providers find impossible to ignore.

Motor insurance

Women have long been offered cheaper car insurance than men – although the reason for this is not simply, as many believe, that women have fewer accidents. In fact, quite the opposite is true. Women have more accidents than men, but the collisions that they have tend to be much less serious.

When it comes to fatal or very severe accidents, it is more likely that men are involved, and these prove much more expensive for insurance companies. But paying for repairs, or replacement of a car, is not the biggest cost. In a more serious accident, insurers are often left picking up medical bills and compensation payments for third parties – and these can run into hundreds of thousands of pounds.

"What you'll find is that men tend to have more high-value accidents," says Niki Bolton of Sheilas' Wheels, the specialist women's car insurer, "whereas women tend to have more bumps and scrapes – usually at lower speeds and closer to home – which is why their insurance is cheaper."

When it comes to young drivers, these trends are even more pronounced. According to recent Government statistics, more than 60 times as many young men are convicted of driving offences as young women. As a result, premiums for young female drivers are hundreds of pounds less than they are for men of the same age.

Conversely, car insurance premiums tend to become more expensive for women as they near retirement age.

Protection

Protection products – such as life insurance and income protection – are more of a mixed bag when it comes to gender. Kevin Carr of Lifesearch, the specialist protection broker, says that for life insurance, women will almost always pay lower premiums. "Life insurance is cheaper for women because life expectancy is longer than it is for men," he explains. "Premiums can be anything up to 20 per cent less for women."

For example, a 35-year-old, non-smoking man taking out £150,000 worth of life cover over 25 years, would pay £12.91 with Aegon. However, a non-smoking woman of the same age would pay just £10.33 – representing a saving of about £800 over the life of the policy.

When it comes to income protection insurance, however, it's a very different story. "Income protection is certainly more expensive for women," says Carr. "It can be two to three times more, and that's because the claims histories show that women are much more likely to take time off work for illness."

The actual cost of income protection varies according to your profession. However, it can be particularly expensive for female teachers, for example, where the number of female claims for depression and stress-related conditions are high. For example, a 35-year-old male teacher looking to buy a policy which would pay out £1,500 a month if they were sick (with a six-month deferment until the first payment) would pay a premium of £34.51 a month with Scottish Provident. A female teacher, however, would pay £53.24 for the same level of cover.

When it comes to critical illness cover, Carr says the gender gap is not quite as clear, however. A woman willing to exclude breast cancer from the list of illnesses that her policy would pay out for, would almost certainly get a cheaper deal than a man looking for a similar level of cover.

"Women are more likely to be off work, whereas men are more likely to die younger," says Carr.

Pensions

Although the pay gap between the sexes is slowly narrowing, a report published by Scottish Widows last month claimed that the pensions gap between men and women is still widening. More than one in three women of working age do not have any pension at all, compared with just over one in five men, while lower average earnings and career breaks for children mean that those women who do have pension savings tend to have less.

The introduction of personal accounts in 2012 – which all employees will be automatically enrolled into, and into which employers will be compelled to contribute – will help ensure that more women start making pension savings at a younger age.

However, the Scottish Widows report highlighted that many women who do have pensions are losing out by taking a much more conservative investment strategy than men. For example, men under 30 are twice as likely to be saving for their retirement in investment bonds, endowments and stocks and shares ISAs, which generate better long-term returns than cash savings accounts. Twelve per cent of men under 30 have an investment bond, endowment or a stocks and shares ISA, compared with just 5 per cent of women.

The problem of lower pensions for women is then compounded when they reach retirement, as they also tend to end up with lower annuity rates when they try to convert their pension pot into an income for the rest of their lives.

"A man aged 65 would get an annuity rate of about 7.5 per cent, while a woman would get 7 per cent," says Tom McPhail, the head of pensions research at Hargreaves Lansdown, the Bristol-based financial adviser and stockbroker. "This is because the annuity company expects her to live three or four years longer than the man. So in theory, women are still enjoying the same value from their pension fund, but in the form of smaller payments over a longer period." It's worth remembering that you have the right to shop around for an annuity, which is all the more important for women given that they are already being penalised for living longer. If you're a smoker, or have a chronic illness, you could qualify for a better rate.

McPhail points out that it's worth taking the time to plan your retirement with your partner. By 2011, almost the first £10,000 of annual income will not be taxed. Hence for a woman with little or no pension, it may make sense for their husband to divert some of his savings into her pot, so that she is able to take advantage of tax-free allowances.

To find a financial adviser in your area, visit www.unbiased.co.uk

Using a specialist saved me money

Nikki Harris, a hairdresser from Cardiff, decided to call Sheilas' Wheels, the specialist women's car insurer, the last time she needed to renew her motor insurance.

Tesco insurance, with whom she had a policy, had already offered her a very competitive deal, so she thought it was unlikely that she would get a better rate elsewhere. However, she was happy to discover that the quote from Sheilas' Wheels came in at about £30 less expensive.

"My car's pink, and I'd seen all their pink adverts, so I thought I should at least give it a go," says Nikki. "I was very impressed that they were cheaper, as Tesco was already very good value."

Nikki says that as well as the cheaper rate, she was also attracted by the extras that came with Sheilas' Wheels' policies. As well as insuring the car in the event of an accident, the policy also offers "handbag cover" of up to £300 – offering protection in the event that the car owner's handbag is snatched from the car.

A further £200 of personal possessions cover is also included in the event of a break-in. Sheilas' Wheels also offers specialised counselling services for female claimants, and trains all its repairers to follow a " female-friendly" code of practice.