Portfolio Adviser • Portfolio Adviser March 2025 • Risk

Steph Willcox, Dynamic Planner’s head actuary, on how attitudes to risk are reinforcing the pensions gender gap and how financial advice can help redress the balance

In December, the government published the annual Valuation Office Agency (VOA) gender pay report 2024, and it showed that the mean gender pay gap – the average difference in salary between all the men and women in our workforce – is again, reducing. The average gender pay gap is now 6.9% but this is not pulling through to pensions, where we see pension pots for men and women are still greatly different.

Some of this is due to women taking career breaks to have and raise children. During this time their pension contributions are likely to be reduced by choice, or simply because they are now being based on statutory maternity pay, rather than their full-time salaries.

Once women return to work, they are often the primary caregivers of children, returning to part-time roles with reduced salaries and therefore keeping their pension contributions lower in monetary terms than their male counterparts.

Even if we could equalise pension contributions, we may not see the pensions gap decrease as much as we would expect.

Attitude to risk questionnaires can provide insight into a client’s financial personality – an understanding of your client’s behaviours, thoughts and emotions to assess their attitude towards taking investment risk. It also assigns each client an overall ‘risk profile’ on a one-to-10 scale, describing their overall attitude to risk, with one being the lowest risk and 10 the highest.

Data collected this year confirms that males are more risk-tolerant than females, with more women falling into risk profile one-to-five, while more men fall into risk profile six-to-10 (see figure 1).

Taking less risk over the long term will naturally reduce the returns clients receive; though, of course, it will also reduce the potential of big losses. Even a small change in attitude to risk, switching from a risk profile four to a six, for example, produces a large differential in expected portfolio values over time.

Our research into financial wellbeing and vulnerability shows us the impact advisers can have on clients’ emotional ability to withstand losses in the market, and that this may be even more pronounced for women.

In particular, clients are asked to assess their agreement with the statement: “I am easily disheartened if I fail to achieve my financial goals.” Not only do more females agree or strongly agree with this statement than males, but they also show the biggest change based on whether they currently receive financial advice or not (see figure 2).

In summary, coaching your clients to make better financial decisions has always been a vital part of the financial advice process, but it’s clear that this could have an even greater impact on women – and on the narrowing of the pensions gap.