The Financial Conduct Authority’s plans for targeted support will help close the gender ISA gap, says AJ Bell.
AJ Bell’s Money Matters research shows women continue to lag men in their ISA savings despite the savings product being more popular amongst women. As many as 11.5 million women hold ISAs, compared to 10.7 million men, however the gender ISA gap stands at £6.6 billion, according to HMRC data.
A preference for cash ISAs over stocks and shares ISAs, coupled with the gender pay gap and career disruptions, have led to women holding less money than their male counterparts, the investment platform said.
While women start their financial lives with healthy stocks and shares ISA contributions and slightly higher average balances than their male counterparts, a gap in ISA wealth starts to show at age 21. This peaks between the ages of 30-39, when women have 46% less than men in ISAs on the AJ Bell investment platform.
The average man with an ISA holds £3,000 more than a woman with an ISA, for cash and stocks and shares ISAs combined, with women holding on average 10% less in their ISAs than men.
However, when women do invest, they outpace men in average stocks and shares ISA subscriptions each month on the AJ Bell platform, the firm said.
Baroness Helena Morrissey, founding ambassador of AJ Bell Money Matters, said: “It’s unfortunately no surprise that the gender ISA gap exists. Cash ISAs are considered a safe haven by women in the UK, potentially protecting wealth during market downturns but with pitiful growth in the long term compared with the average returns seen from investing.
“Our research shows that investment behaviour plays a key role, with men tending to take more risks, leading to higher returns in strong markets, while women often adopt more cautious strategies, such as sticking to cash ISAs and investing in lower risk funds. Combined with the gender pay gap and career interruptions, these factors contribute to a significant wealth disparity that continues into later life.
“Through AJ Bell Money Matters, we’re calling for individuals, financial services firms and policymakers to take steps to close the gender ISA gap.”
AJ Bell said women encounter a number of barriers preventing them from investing, including a lack of knowledge, fear of making mistakes, choice paralysis and trust issues with financial services. Women are far more likely to say they feel nervous about investing than men and on average men make around 12 trades per year compared to nine among women.
The research found women are also more pessimistic on markets, expecting stock markets to remain flat in 2025. In comparison, men expect the stock market to rise by up to 10% this year.
Laura Suter, director of personal finance at AJ Bell, commented: “It’s understandable that people think investing is scary; it can feel like a daunting world to enter. But all too often we let perfection be the enemy of progress, you don’t need to be an investing guru with a huge stash of wealth to get started. Sticking to cash is a smart move for any money you don’t want to take risk with or you know you need to spend in the next few years, but it’s a terrible place for long-term wealth.”
AJ Bell’s data showed that if someone saved £1,000 a year into cash ISAs since they were launched in 1999 and earned the average cash ISA interest rate, they’d have a pot worth £34,400. However, had this been invested in the average return of a fund investing in global markets, the pot would be worth £83,600 after the same period.
“These figures highlight exactly how women are harming their future wealth by not embracing investing. But it’s not just down to individual action. There is much more both the financial services industry and policymakers can do to encourage this group to start investing. At a time when the Government is looking for ways to boost investment in the UK and encourage people to shift from cash, this is a clear win for all,” Suter added.
To close the gender ISA gap, AJ Bell is calling upon the financial services industry to simplify investment choices, whether through a streamlined range, better tools or a clearer customer journey. It has also called for systemic change to make ISAs more accessible, noting that people feel overwhelmed by multiple ISA types.
“Simplifying ISAs would encourage more participation, especially among women. AJ Bell advocates for a unified ‘One ISA,’ merging the best features of existing ISAs to make saving and investing easier.
“Better support and guidance are also crucial, as not everyone can access regulated financial advice. The FCA and Treasury’s plans for targeted support are a step in the right direction,” the firm said.
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