Women in top paying jobs 38% poorer than male colleagues when they reach old age, says study

UBS Wealth Management looked at the financial situation of high earning men and women over their lifetimes

Emma Featherstone
Monday 23 October 2017 15:37
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Highly paid women earn $800,000 less than their male colleagues over their lifetime, according to the research
Highly paid women earn $800,000 less than their male colleagues over their lifetime, according to the research

Women in top paying jobs will on average be 38 per cent poorer than their male colleagues when they reach old age, new research suggests.

According to a study by UBS Wealth Management, the average 25-year-old woman living in a developed country currently earns 10 per cent less than a man of the same age.

When taking into account a career break for women as females still tend to be the main caregivers for children and ageing parents by the time they are 85, women will have 43 per cent less wealth than men, the study, which is entitled ‘How women can best protect and grow their wealth’, suggests.

The research looks specifically at high earning workers, using hypothetical people who fit the client profile of the bank’s wealth management unit. The illustrative examples are a woman called “Jane” and a man called “Joe”. When they are both 25, Jane has a starting salary of $100,000 (£75,930) and Joe a starting salary of $110,000. The difference in their salaries reflects the gender pay gap. They both inherited $1m when they were 24.

The gender pay gap grows between the man and the woman, and the woman will earn $800,000 less than the man over her lifetime.

Meanwhile, as women still take on the bulk of family caring responsibilities, the study assumes the woman will take a year off with no pay at the age of 40, by which time her income has grown significantly. As such, she loses a year’s salary and has no savings to invest from this period. The time out also stalls her career progression.

These factors combine to result in the gender wealth discrepancy in old age. The study also suggests that women’s wealth takes a further hit if they have a flexible work arrangement in which they work part-time.

Also possibly contributing to women being poorer in old age, the study finds that women tend to be more risk-averse investors and that they tend to invest more conservatively than their male counterparts, yielding slimmer returns.

As a result of women generally having a greater life expectancy, the female in the case study is also more likely struggle to maintain her lifestyle in retirement and will be less able to pass wealth onto the next generation. According to the latest figures from the Office for National Statistics, the UK life expectancy is 82.9 years for women and 79.2 years for men.

The bank says in order to maximise the chance of reaching her goals, such as passing on wealth to younger generations, the woman should follow a medium-risk investment strategy until she retires, when she could afford to move her money into a moderate-risk strategy.

The gender pay gap varies between industries, but across all UK employees it stood at 18.1 per cent in 2016
, according to the Office for National Statistics. The gender pay gap for full-time employees was 9.4 per cent.

Under new legislation introduced this year, all British companies with 250 or more employees have to report their gender pay gap by April 2018. When reporting, employers are able to give context to their figures. A shortage of women in high earning positions is often cited as a reason for an overall pay gap.

The gender pay gap varies between industries, but across all UK employees it stood at 18.1 per cent in 2016, according to the Office for National Statistics. While the gender pay gap for full-time employees was 9.4 per cent.

Under new legislation introduced this year, all British companies with 250 or more employees have to report their gender pay gap by April 2018. When reporting, employers are able to give context to their figures. A shortage of women in high earning positions is often cited as a reason for an overall pay gap.

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