Spinster is a term derived from spinner, women who spun wool in the 14th century. It was skilled labour and therefore paid enough for women to support themselves. These women were financially independent and did not need to marry out of economic necessity. It also meant they were able to rely on their chosen profession to see them into a comfortable old age.
Thankfully, those of us with less nimble fingers have more career options available to us today. But what about our retirement, can we count on our pension pots to ensure financial security post retirement?
According to the World Economic Forum (forum), more women live in poverty in retirement than men (16% compared to 12%). Here in Ireland women have on average 30–40% less than their male counterparts. Some of the reasons for this differential are well understood. Women often earn less than men (the pay gap is up to 20% in the western world). Women tend to bear the financial brunt of taking time off to start and raise a family resulting in gaps in pension contributions; and women tend to live longer meaning they spend more years of their lives in retirement and they spend part of it alone, so they have no one with whom to share household expenses.
Some of these financial uncertainties can be alleviated by pension planning. However, when it comes to pensions women don’t always make the same decisions as men, to their own detriment. I have been advising Cantor Fitzgerald pension clients for a number of years and have noticed similar patterns that have been backed up by industry research. Women often start their pensions around the same time as their male colleagues, however career breaks and part-time work reduce the period of overall working time. While women tend to save less, men seek out supplemental pension options like Additional Voluntary Contribution (AVS) plans more often than women. This is in part due to a lack of knowledge of the options available.
Given my role as an investment manager one thing that really stands out to me is that women often opt for lower risk investment choices than men. This might result in less sleepless nights during periods of market volatility, but it also results in reduced performance over the lifetime of a pension. So even if a woman contributes the same amount to her pension as a man, and for the same amount of time, the overall pot ends up smaller due to growth constraints.
All of this combines to a lower quality of life for the majority of women in retirement which could be remedied in part with simple government intervention, such as auto pension enrolment and better financial education at schools, investment companies could also play a more active educational role.
The investment management sector is not known as a shining beacon for equality, evidenced by the number of funds managed by women (in the US 14 out of a total 496 large cap US equity funds are managed by women). So, what happens when women find themselves in a decision-making position within an asset management company, how do female fund managers compare to their male counterparts? According to research by Goldman Sachs all-women US fund teams outperformed all-male portfolio managers in 2020 up to September, one of the most volatile years in recent times. And a 2018 study by Morningstar, the fund management research website, found that the gender of a portfolio manager made no difference to performance in either equity or bond funds over a longer time period.
The corporate world is equally male dominated, with only 1 UK SME company in 8 being led by a majority female team (>75%). So how do these female-led companies fare? KSA Group, a leading UK insolvency practitioner researched over 4 million SME companies to analyse the financial health of businesses. The study showed that the insolvency rate is 70% higher in male-run companies (only 12 out of 347 companies that went into administration were female-run).
Female-run companies are also more likely to be successful if judged by the average stock market returns. On average, the 24 companies in the S&P 500 with a female CEO outperformed male-led companies in terms of cumulative total returns during their tenures. Naturally, there are numerous and often complex reasons for a company to either succeed or fail but it is heartening to see that women brave enough to start their own business are less likely to collapse and more likely to thrive.
Much like the spinsters of old, women who take control of their financial future through their pension and savings, investment and business choices can flourish in society. Women of the world, invest, in yourselves and your future.
Hellen Dalton is a Senior Investment Manager at Cantor Fitzgerald Ireland.
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