Gender ISA gap widens

“The latest figures from HMRC reveal that women continue to stick to cash ISAs, while men opt for stocks and shares ISAs, meaning men are reaping the rewards of greater returns” says Emma Cherrington, Independent Financial Adviser

Over the long term, stocks and shares tend to outperform cash ISAs and women are paying the price for sticking with cash.

The 2018/19 figures from HMRC revealed over a million men took out a stocks and shares ISA, compared with 785,000 women.  In the same year, approximately 4.4 million women took out a cash ISA, compared with 3.5 million men.

Men have an average ISA holding of £30,089 while women hold an average of £27,098, resulting in a gender ISA gap of £3,000. These figures have increased since the year before, when the gap was £2,812, but shockingly they have almost doubled since 2008/09 when the gap was at just £1,550.

Although women in the UK have 52% of ISAs they are held back from possible growth by holding so much of their money in cash.

Traditionally women have earned (on average) less than their male counterparts, due in some instances to having time off to start and raise a family, or care for relatives. This variance in their income may be why women are reluctant to accept the risk that comes with any investment, as they do not want to accept the risk of volatility in the value over the short term.

We know that the more you earn, the more likely you are to have savings, and in turn investments. When income reaches £30,000 per annum this seems to be the level that people move from cash ISAs to stocks and shares ISAs.

The data shows that women are not considering the long term risk and reward relationship. Often they are over estimating the likelihood of their investments going down over the long term, when on average they increase.

Women also tend to underestimate the risk their cash ISAs will decrease, as they aren’t considering the effect of inflation. When you consider that the most competitive easy access ISA could be paying 0.66% interest, but inflation is at 5.5%, the ISA is effectively decreasing and losing its spending power from the start.

However here at Active Chartered Financial Planners we seem to be bucking the trend as we’ve recently seen more women making the move from cash ISAs to stocks and shares ISAs; transferring them so that they can maintain the important ISA wrapper and the tax efficient benefits that brings.

It is important for both men and women to make the most of their cash monies. Inflation is currently high and holding your money in cash does not mean it will not decrease in value, as it carries inflation risk. Over the past few years I have seen more clients disappointed with the rates of returns offered to them in savings accounts and cash ISAs, leading to them looking at alternatives for their savings. A stocks and shares ISA is a great option; monies invested this way grow tax efficiently and if you need access to your money, there are no penalties or tax to pay.

Making the move and investing your cash over the long term with the aim of growth to match or beat inflation is the way to make your money keep its value and spending power.

You can invest £20,000 per tax year into an ISA, and can ISA transfer existing ISAs into each other or in to a new one”.

The content of this blog is for information only and must not be considered as financial advice.  We always recommend that you seek independent financial advice before making any financial decisions.

Levels, bases of and reliefs from taxation may be subject to change.

The Financial Conduct Authority does not regulate taxation and trust advice.  Active Chartered Financial Planners recommends you speak to a Tax Adviser/Accountant for this; Active would be happy to introduce you to one of our close partners.

Stocks & Shares ISAs do not include the same security of capital which is afforded with a Cash ISA.  You may get back less than the amount invested.

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